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Business strategy, intellectual capital, firm performance, and bankruptcy risk: evidence from Oman's non-financial sector companies

Author

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  • Tamanna Dalwai
  • Mahdi Salehi

Abstract

Purpose - This research examines the influence of business strategy and intellectual capital on firm performance and bankruptcy risk of Oman's non-financial sector companies. Design/methodology/approach - The data comprises 380 firm-year observations collected from 2015 to 2019 for the non-financial sector companies listed on the Muscat Securities Market. This study measures business strategy using the Miles and Snow typologies and Porter's strategies as alternative measures. The study uses the Granger-causality test to measure the bi-directional causality between independent and dependent variables. The authors use alternative measurements of business strategy and 2SLS/IV estimation to validate the OLS results. Findings - According to the Miles and Snow typologies, most of Oman's non-financial firms were analyzers. The empirical results show a negative relationship between business strategy and return on equity (ROE), suggesting defender-type strategy leads to an increase in firm performance. The OLS results show no influence of A-VAIC on firm performance and Altman-Zscore. The structural capital efficiency is positively associated with ROA, and AltmanZscore consistent with the hypothesized relationship. The Granger causality test shows no inference of causality between any independent and dependent variables except forZscore and CEE. Research limitations/implications - The business strategy results from the firm performance and bankruptcy risk models are valuable to the researchers from an emerging market and non-financial companies' perspective. Oman's diversification strategy of its economic activities through non-financial sector companies receives an impetus through the findings of this study. As this study is limited to Oman's non-financial sector companies, future research on business strategy impact can be extended to the financial sector, other GCC, and emerging countries. Originality/value - The findings of this study contribute to the sparse literature on business strategy in an emerging market like Oman. This study enriches the knowledge of business strategy typologies proposed by Miles and Snow, and Porter. It also contributes to the extant literature on firm performance and bankruptcy risk.

Suggested Citation

  • Tamanna Dalwai & Mahdi Salehi, 2021. "Business strategy, intellectual capital, firm performance, and bankruptcy risk: evidence from Oman's non-financial sector companies," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 29(3), pages 474-504, August.
    • Handle: RePEc:eme:arapps:ara-01-2021-0008
    DOI: 10.1108/ARA-01-2021-0008
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    Citations

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    Cited by:

    1. Gang Wang & Yi Shen, 2023. "Did quantitative easing reduce the borrowing costs of firms? The risk‐taking channel," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(1), pages 507-536, March.
    2. Ahmed Mohamed Habib & Tamanna Dalwai, 2024. "Does the Efficiency of a Firm’s Intellectual Capital and Working Capital Management Affect Its Performance?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 3202-3238, March.
    3. Ahsan Habib & Dinithi Ranasinghe & Ahesha Perera, 2024. "Business strategy and strategic deviation in accounting, finance, and corporate governance: A review of the empirical literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(1), pages 129-159, March.
    4. Mishra, Deepa Bhatt & Haider, Imran & Gunasekaran, Angappa & Sakib, Md. Nazmus & Malik, Nishtha & Rana, Nripendra P., 2023. "“Better together”: Right blend of business strategy and digital transformation strategies," International Journal of Production Economics, Elsevier, vol. 266(C).

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