CORPORATE FINANCIAL RISK AND PERFORMANCE: EVIDENCE FROM OMANI FINANCIAL SECTORS.

Abstract

This study explores the intricate relationship between corporate financial risk and performance, aiming to provide insights into how Omani firms manage risk to optimize their financial outcomes. Financial risk is a critical aspect of corporate management, influencing decision-making processes, investment strategies, and overall performance. Through a comprehensive review of literature and empirical analysis, this research examines various dimensions of financial risk, including liquidity risk, and defaults risk, and their impact on corporate performance metrics such as return on assets and return on equity. Additionally, the study investigates these variables related to financial sectors companies list in Oman stock exchange with include 14 banks for the period of 2019-2023 2ith total observations of 70 which is suitable to make the regressions model.  The findings contribute to a deeper understanding of the complex dynamics between financial risk and performance, offering valuable insights for corporate managers, investors, and policymakers in navigating today's volatile business environment. Using the regressions methods of analysis the study finds that there is significant effect of these risks on financial performance, this is evidence that financial sectors top leadership need to establish the optimal level of liquidity risk to ensure maximum shareholder return. The influence of defaults risk on return on assets was concluded to have a positive relationship with returns on assets when evaluated in separation. The study indicates that when faced with multiple financial risk, banks need to hedge some of the risk to minimize on adverse impact on the shareholder market value.

Keywords: Financial risk, defaults risk, liquidity risk , Return on assets (ROA) ,Return on Equity ( ROE) , OMAN 

JEL Classification: G11, G12, G21