The cash conversion cycle spread: International evidence
MetadataShow full item record
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.
Showing items related by title, author, creator and subject.
Saili, Abdul Rahman (2011)Farmers‟ markets are an exciting and important form of free enterprise. They have a strong potential to support sustainable development due to the myriad of economic and social benefits they could bring to a society. ...
An examination of the factors critical to the establishment and maintenance of competitive advantage for education services enterprises within international markets.Mazzarol, Timothy W. (1997)The principal focus of the present study was to examine the factors critical to the development and maintenance of a competitive advantage for education institutions operating in international markets. International ...
Pojanavatee, Sasipa (2013)Mutual funds are emerging as an opportunity for investors to automatically diversify their investments in such a way that all their money is pooled and the investment decisions are left to a professional manager. There ...