Cash Conversion Cycle and Profitability of Indonesian Property and Real Estate Companies: Quarterly Evidence across Pre-, During-, and Post-COVID-19 Periods

Abstract

extended development timelines and substantial working capital requirements, making effective working capital management a critical determinant of firms’ financial performance. Objective: The present study investigates the effects of CCC and its sub-components on the financial performance of property and real estate companies listed on the Indonesia Stock Exchange (IDX) over the 2017 Q2–2025 Q1 observation period. Methods: The study uses quarterly panel data from 37 companies, comprising 1,184 firm-quarter observations. Financial performance is operationalized using Return on Assets (ROA), Return on Equity (ROE), and Tobin’s Q, while working capital management is measured using CCC, Days Sales Outstanding (DSO), Days Inventory Outstanding (DIO), and Days Payable Outstanding (DPO). The analytical framework employs a Random Effects model with cluster-robust standard errors, supplemented by the two-step System Generalized Method of Moments (System GMM) estimator as a robustness check. Results: Under the Random Effects model, CCC exhibits a negative and statistically significant association with ROA and ROE but has no significant relationship with Tobin’s Q. Both DIO and DPO are negatively and significantly associated with ROA and ROE, whereas DSO does not reach statistical significance. When estimated using System GMM, the effects of CCC, DIO, and DPO lose statistical significance after controlling for dynamic effects and potential endogeneity, while DSO exhibits a positive and statistically significant effect on ROA. Conclusion: The findings indicate that working capital management is more strongly associated with accounting-based profitability than with market-based performance measures, with these associations weakening considerably when dynamic panel effects are incorporated into the estimation.