The cash conversion cycle spread: International evidence
The cash conversion cycle (CCC) is important for fundamental analysis as an indicator of management effectiveness in cash and financing. However, there is a lack of empirical evidence for its implications on asset pricing except for the very recent findings that high CCCs negatively predict stock re...
| Main Authors: | , , |
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| Format: | Journal Article |
| Published: |
2022
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| Online Access: | http://hdl.handle.net/20.500.11937/89106 |
| _version_ | 1848765162390028288 |
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| author | Chen, Catherine Huirong Choy, Siu Kai Tan, Yongxian |
| author_facet | Chen, Catherine Huirong Choy, Siu Kai Tan, Yongxian |
| author_sort | Chen, Catherine Huirong |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | The cash conversion cycle (CCC) is important for fundamental analysis as an indicator of management effectiveness in cash and financing. However, there is a lack of empirical evidence for its implications on asset pricing except for the very recent findings that high CCCs negatively predict stock returns in the U.S. By investigating 47 developed and emerging markets from 1993 to 2018, we find a mild CCC effect across the globe. The Low-minus-High equal-weighted hedge portfolios sorted by components of CCC yield significant Fama-French five-factor alphas ranging from 0.277 to 0.730% per month. Our results are consistent with a mispricing explanation by analyzing earnings prediction, announcement returns around future earnings, and limits of arbitrage although there is also some evidence for a risk-based explanation. Moreover, the CCC effect is stronger in emerging markets than developed markets and for markets with more political risk and less integrated with the global market. |
| first_indexed | 2025-11-14T11:30:52Z |
| format | Journal Article |
| id | curtin-20.500.11937-89106 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T11:30:52Z |
| publishDate | 2022 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-891062022-08-29T01:38:03Z The cash conversion cycle spread: International evidence Chen, Catherine Huirong Choy, Siu Kai Tan, Yongxian The cash conversion cycle (CCC) is important for fundamental analysis as an indicator of management effectiveness in cash and financing. However, there is a lack of empirical evidence for its implications on asset pricing except for the very recent findings that high CCCs negatively predict stock returns in the U.S. By investigating 47 developed and emerging markets from 1993 to 2018, we find a mild CCC effect across the globe. The Low-minus-High equal-weighted hedge portfolios sorted by components of CCC yield significant Fama-French five-factor alphas ranging from 0.277 to 0.730% per month. Our results are consistent with a mispricing explanation by analyzing earnings prediction, announcement returns around future earnings, and limits of arbitrage although there is also some evidence for a risk-based explanation. Moreover, the CCC effect is stronger in emerging markets than developed markets and for markets with more political risk and less integrated with the global market. 2022 Journal Article http://hdl.handle.net/20.500.11937/89106 10.1016/j.jbankfin.2022.106517 restricted |
| spellingShingle | Chen, Catherine Huirong Choy, Siu Kai Tan, Yongxian The cash conversion cycle spread: International evidence |
| title | The cash conversion cycle spread: International evidence |
| title_full | The cash conversion cycle spread: International evidence |
| title_fullStr | The cash conversion cycle spread: International evidence |
| title_full_unstemmed | The cash conversion cycle spread: International evidence |
| title_short | The cash conversion cycle spread: International evidence |
| title_sort | cash conversion cycle spread: international evidence |
| url | http://hdl.handle.net/20.500.11937/89106 |