Working Capital Management and Shareholder’s Wealth Creation: Evidence from Manufacturing Companies Listed in Oman

Shrikant Krupasindhu Panigrahi (), Maryam Juma Al Farsi, Sumathi Kumaraswamy, Muhammad Waris Ali Khan () and Faisal Rana
Additional contact information
Shrikant Krupasindhu Panigrahi: Department of Economics and Finance, College of Business Administration, University of Bahrain, Sakhir P.O. Box 32038, Bahrain
Maryam Juma Al Farsi: College of Business, University of Buraimi, Al Buraimi P.O. Box 562, Oman
Sumathi Kumaraswamy: Department of Economics and Finance, College of Business Administration, University of Bahrain, Sakhir P.O. Box 32038, Bahrain
Muhammad Waris Ali Khan: Faculty of Business and Law, The British University in Dubai, Dubai P.O. Box 345015, United Arab Emirates
Faisal Rana: School of Business Administration, American University in Dubai, Dubai P.O. Box 28282, United Arab Emirates

IJFS, 2022, vol. 10, issue 4, 1-16

Abstract: Working capital management (WCM) is a key factor in the success of manufacturing companies when credit is restricted, as is the case in the current climate caused by the COVID-19 crisis. The main purpose of this paper is to investigate the relationship between working capital management, earnings quality, sales growth, and shareholders’ wealth of listed manufacturing firms in Oman. The study used balanced panel data of 31 manufacturing firms listed on the Muscat Stock Exchange (MSE) from 2004 to 2019. The study reveals that days in working capital, cash conversion cycle, payable deferred period, sales growth, and earnings quality positively affects shareholder’s wealth proxied by the return on assets, whereas, days in working capital have a negative effect on return on assets. Similarly, working capital management was found to have no influence on the earnings per share (EPS). It was also documented that sales growth and earnings quality positively impacted EPS. The study concluded that improving sales growth and earnings quality would result in shareholders’ wealth creation. The results are helpful to manufacturing companies to improve their business performance and social welfare through a direct and indirect chain of raising investments, pay, and production scales. This study adds knowledge to the body of literature on working capital management, earnings quality, and sales growth in the areas of methodology, the impact of WCM components on manufacturing firms’ shareholder value, and socioeconomic evidence from Oman.

Keywords: corporate finance; working capital; earnings quality; shareholder’s wealth; sales growth; panel analysis (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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