Digital transformation and corporate cash conversion cycle

This study examines the impact of digital transformation (DT) on firms’ management of the cash conversion cycle (CCC). Based on 2,322 companies for the period of 2010 to 2020, the analysis reveals that increased levels of DT lead to improvements in CCC, primarily by shortening the days inventory outstanding (DIO) and extending the days payable outstanding (DPO). DT’s impact on days sales outstanding (DSO) is less significant. The effects of DT vary between state-controlled and private-owned firms, with non-state-owned enterprises (non-SOEs) experiencing greater improvements in CCC and better performance in DIO and DPO. Additionally, sector-specific analysis shows that DT has a minimal impact on agricultural businesses but significantly benefits manufacturing companies by reducing CCC and extending DPO. In service companies, DT notably shortens DIO. These findings contribute to the understanding of DT’s role in capital management and provide insights into its varying effects based on firm ownership and industry.