The cash conversion cycle spread

Baolian Wang

Journal of Financial Economics, 2019, vol. 133, issue 2, 472-497

Abstract: The cash conversion cycle (CCC) refers to the time span between the outlay of cash for purchases to the receipt of cash from sales. It is a widely used metric to gauge the effectiveness of a firm's management and intrinsic need for external financing. This paper shows that a zero-investment portfolio that buys the lowest CCC decile stocks and shorts the highest CCC decile stocks earns 5%–7% alphas per year. The CCC effect is prevalent across industries, remains even for large capitalization stocks, distinct from the known return predictors, and cannot be explained by the financial intermediary leverage risk.

Keywords: Cash conversion cycle; Stock returns; Intermediary asset pricing (search for similar items in EconPapers)
JEL-codes: G02 G12 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (34)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:133:y:2019:i:2:p:472-497

DOI: 10.1016/j.jfineco.2019.02.008

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