Current Assets Management, Remuneration, and Operating Cash Flow of UAE Construction Companies

Haitham Nobanee,Mohammed Haitham A Salman ,Jaya Abraham

doi:10.5430/ijfr.v12n3p142

Haitham Nobanee, Mohammed Haitham A Salman + Show 1 more

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https://doi.org/10.5430/ijfr.v12n3p142

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Abstract

This paper examines the effect of current assets management and remuneration on operating cash flow of construction firms listed in the United Arab Emirates stock market before and after the financial crises of 2008. The results present a negative and significant relationship between cash conversion cycle and operating cash flow for the full sample. The results also show a negative and significant relationship between the cash conversion cycle and operating cash flow of the firms during the crisis period. This indicated that the UAE construction companies were more efficient in managing their current assets during the crisis period.

Highlights

The economy of the United Arab Emirates (UAE) is the second largest in the GCC (Gulf Cooperation Council) region, with Saudi Arabia being the largest
The shorter the cash conversion cycle, the higher the operating cash flow. This meant that construction firms used their current assets efficiently increasing their operating cash flow
The main aim of this paper was to examine the effect of liquidity management on the operating cash flow of construction firms listed on the United Arab Emirates stock markets before and after the Great Recession

Summary

Introduction

The economy of the United Arab Emirates (UAE) is the second largest in the GCC (Gulf Cooperation Council) region, with Saudi Arabia being the largest. The government created a favorable business climate, a flexible legal environment that allows a hundred percent foreign ownership in Free Trade Areas, pegging of its currency to the US dollar, creating cultural diversity and potential for a high standard of living contributed to the economic growth of UAE. It reached a peak when the contribution of construction and real estate activities to the real GDP increased from 8.2 percent in the year 2012 to 10.3 percent in 2016. By 2018, the total value of contracts awarded amounted to $31.5 billion while it was $28.6 billion in 2017(Mordor Intelligence, 2020)

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