The Determinants of The Cash Conversion Cycle Of Public Firms In Pakistan

Abstract

This study investigates the determinants of the cash conversion cycle (CCC) among public firms listed on the Pakistan Stock Exchange (PSX). Using panel data from 466 firms across ten industrial sectors, the research examines how total sales, return on equity (ROE), leverage, market-to-book ratio, and asset change influence CCC. Panel regression and dynamic system GMM estimations reveal that sales and market-to-book ratio significantly reduce CCC, implying that efficient sales management and stronger market valuation improve working capital efficiency. Conversely, asset change positively and significantly increases CCC, suggesting that rapid asset expansion may prolong cash flow recovery. ROE and leverage are found largely insignificant in explaining CCC variations across sectors. Among industries, the healthcare sector records the highest CCC, while the retail sector shows the lowest, indicating superior liquidity management in retail. These findings provide actionable insights for policymakers and managers to optimize working capital and for investors seeking efficient sectors for capital allocation. Panel regression and dynamic system GMM estimations with robustness checks validate the results.