Operating-Cycle Frontiers and Earned Equity Accumulation: Global Evidence Across Life-Cycle Stages and Institutions

Abstract

This study investigates whether operating-cycle duration is associated with the accumulation of earned equity and whether this relation varies across corporate life-cycle stages and institutional settings. Using a global panel of non-financial and non-utility firms from 134 economies during 2000-2025, the analysis treats retained earnings scaled by total assets as a cumulative measure of internally generated equity rather than as a short-term profitability ratio. Quadratic regressions show a concave association between the cash conversion cycle and retained earnings, indicating that both excessively compressed and excessively extended operating cycles can be inconsistent with stronger internal-financing capacity. Additional tests show that the fitted frontier depends on model specification, inventory and receivables behavior, life-cycle stage, and national institutional setting. The evidence supports a context-dependent operating-liquidity frontier and cautions against converting any single turning point into a universal managerial benchmark. The study contributes to working-capital, corporate life-cycle, and internal-finance research by linking operating liquidity choices with the long-run stock of earned equity and by clarifying when nonlinear estimates should be interpreted conservatively.