Cash flows and financial performance in the industrial sector of Saudi Arabia: With special reference to Insurance and Manufacturing Sectors

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A firm with proper cash flow management can increase its financial performance, while improper management might lead to financial failure. Therefore, it is significant for a firm to manage cash inflows and outflows properly. The current study investigates the effect of cash flow from operations (CFOs) on the financial performance of insurance and manufacturing companies in Saudi Arabia. The data were extracted from companies’ annual reports by considering Return on Assets (ROA) and Return on Equity (ROE) as dependent variables, CFOs as an explanatory variable, firm size (SIZE) and Leverage (LEV) as control variables, and an industry dummy. The results report a positive and significant association between financial performance (ROA and ROE) and operating cash flows (CFOs), and a negative association for SIZE and LEV. Therefore, the study concludes that the firms’ operating cash flows in the insurance and manufacturing sectors in Saudi Arabia affect financial performance.

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    • Table 1. Definitions of dependent and independent variables
    • Table 2. Descriptive statistics of study variables
    • Table 3. Correlation analysis of study variables
    • Table 4. Result of regression analysis
    • Table 5. Result of regression analysis
    • Conceptualization
      Abdul Rahman, Raj Bahadur Sharma
    • Formal Analysis
      Abdul Rahman
    • Investigation
      Abdul Rahman, Raj Bahadur Sharma
    • Methodology
      Abdul Rahman
    • Project administration
      Abdul Rahman, Raj Bahadur Sharma
    • Supervision
      Abdul Rahman
    • Validation
      Abdul Rahman, Raj Bahadur Sharma
    • Visualization
      Abdul Rahman
    • Writing – original draft
      Abdul Rahman, Raj Bahadur Sharma
    • Writing – review & editing
      Abdul Rahman, Raj Bahadur Sharma
    • Data curation
      Raj Bahadur Sharma