Relationship of cash conversion cycle and PRGap with firm performance: an empirical study of Taiwanese companies


The study investigates how working capital management (WCM) impacts the profitability and operating performance of publicly traded companies in Republic of China, Taiwan. The authors use the quarterly data of 539 stocks listed on the Stock Exchange of Taiwan from 2008 to 2015, containing 17,248 observations. The study examines whether two WCM variables, namely, the cash conversion cycle (CCC), as well as the gap between days of payables outstanding and days of sales outstanding (PRGap) have any significant effects on firm profitability and operating performance. The findings demonstrate that there are significantly negative relationships between the CCC and performance indicators, whereas there are consistent positive relationships between PRGap and performance indicators.

Keywords: working capital management, performance, cash conversion cycle, PRGap, Tobin’s Q.
JEL Classification: G30, G31, G32, M10

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