An Impact of Cash Conversion Cycle on the Stock Market Valuation: Evidence from Firms Listed in the Stock Exchange of Thailand

Abstract

ABSTRACT

This study investigates the impact of cash conversion cycle (CCC) on the stock market valuation of listed companies in the Stock Exchange of Thailand. The study utilizes secondary data derived from financial statements and annual reports covering the period 2020–2022, totaling 1,001 firm-year observations. The statistical techniques employed include descriptive statistics, correlation analysis, and multiple regression analysis. The empirical findings reveal that the cash conversion cycle exhibits a statistically significant negative association with the price to book value ratio (P/BV). This indicates that firms with shorter cash conversion cycles demonstrate more efficient working capital management by minimizing excessive cash tied up in accounts receivable and inventories, thereby enhancing profitability and contributing to a higher market valuation relative to book value. However, this study does not find a statistically significant relationship between cash conversion cycle and price to earnings ratio (P/E). This outcome can be attributed to the fact that P/E ratios primarily reflect the expectations of investors regarding future earnings growth rather than current performance. Since the cash conversion cycle represents a short-term operational efficiency measure, it does not exert a statistically significant influence on the P/E ratio.