Yes, that could be also potential reason.
I already met with USB to serial converter based on Profilic PL2303 driver which was not able transfer signals with XOn/XOff handshaking (communication without flow control works correctly).
I tried also reinstallation of software driver, but without success. So, there was HW issue.
But now I have USB to serial converter based also on Profilic PL2303 and it works correctly.
So, if you can, please change USB to serial converter and test it on the same computer.