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

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 Citation: Panigrahi, Shrikant Krupasindhu, Maryam Juma Al Farsi, Sumathi Kumaraswamy, Muhammad Waris Ali Khan, and Faisal Rana. 2022. Working Capital Management and Shareholder’s Wealth Creation: Evidence from Manufacturing Companies Listed in Oman. International Journal of Financial Studies 10: 89. https://doi.org/ 10.3390/ijfs10040089 Academic Editor: Rob Hull Received: 18 August 2022 Accepted: 16 September 2022 Published: 28 September 2022 Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affil iations. Copyright: © 2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https:// creativecommons.org/licenses/by/ 4.0/). 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.