Effect Of Firm Performance Research Articles

New ventures: how team motivation affects financial outcomes

Purpose The purpose of this paper is to contribute to understanding the impact of entrepreneurial team composition on new venture performance. Different types of entrepreneurship motivation among founding team members are defined. Using a relatively recent theory as a framework (i.e. self-determination theory), the authors group these motives into two categories: autonomous and controlled motivation. The business impact of the level of each type of motivation within the team, as well as the impact of having team members with different motivational drivers, is examined. New venture performance is modelled in two different ways: financial performance (i.e. return on assets) and innovation performance. Design/methodology/approach The analyses are based on 66 founding teams active in diverse activity sectors. The teams represent a total of 142 business founders. Data was collected through structured interviews, a company questionnaire and a secondary data source (i.e. certified financial statements). Findings The results confirm that the level of autonomous motivation within the team contributes to start-up financial performance, whereas the level of controlled motivation hampers innovation performance. No direct effects of diversity of team member motivation on start-up performance were discovered. Originality/value This is one of the first papers to study multiple firm performance effects of the composition of entrepreneurial founding teams in terms of motivation.

Is CEO Turnover Sensitive to Firm Performance? An Informativeness Perspective

This study advances an informativeness perspective to contribute to the understanding of how the sensitivity of CEO turnover to firm performance changes over the course of CEO tenure. The extant literature primarily suggests that the sensitivity of CEO turnover to firm performance weakens over time during a CEO’s tenure and attributes this change to the power shift in the CEO-board relationship. Supplementing this dominant power perspective, we suggest that the attributability, informativeness, and impact of firm performance in boards’ assessment of CEOs change during the early, mid-, and later stage of CEO tenure, even when there is no power shift in the CEO-board relationship. Using a sample of family-controlled firms in Taiwan from 1999 to 2015, we found that the effect of current firm performance on the turnover of professional CEOs was the strongest during the mid-stage and weaker during both the early and the later stages. These results provide support for our theoretical predictions from the informativeness perspective.

Change and Stability in Industry Architectures: Firm Actions and Performance Effects

This study analyzes performance effects of firm efforts to shape the structure of an industry. We view industry structure through the conceptual lens of industry architectures and posit that firms shape these architectures by carrying out a single or multiple of change- and stability-oriented actions over time. We hypothesize that both types of actions differently affect firm performance and that this relationship is moderated by the predictability, segment conformity, and simplicity of firms’ competitive behavior. To test our hypotheses, we created a unique dataset of airline actions that fostered either stability or change in the flight-ticket distribution architecture and assessed, as a proxy for firm performance, the change these actions cause in investors’ expectations of future firm performance once an action is announced. Our findings reveal that change-oriented actions negatively affect firm performance and that this effect is further exacerbated by simplicity in firms’ competitive behavior, but that stability-oriented actions have an inconclusive effect. Our findings challenge the literature’s overwhelming focus on firm-driven change and its associated benefits and makes an initial effort at identifying the factors that both facilitate firm efforts to shape architecture and influence firm performance.

Linguistic variation in the discourse of corporate annual reports: A multi-dimensional analysis

Combining the frameworks of multi-dimensional (MD) analysis and rhetorical structure theory (RST), this study examines the linguistic co-occurrence patterns in the discourse of corporate annual reports (CARs) and interprets their underlying functional dimensions. Our corpus consists of texts of corporate 10K reports from firms listed on New York Stock Exchange (NYSE; N of texts = 642, totally 14,674,047 tokens). Five functional dimensions are quantitatively extracted and qualitatively interpreted: (1) expression of direct persuasion; (2) expression of impersonal stance; (3) subjective versus objective positioning; (4) integrative expression of stance versus fragmented expression; and (5) expression of reliability. All these dimensions contribute to the communicative function of persuasion. The analysis of the rhetorical structures of excerpts with high concentrations of co-occurring linguistic features on each dimension further indicates the communicative strategy of persuasion. The proposed MD model is then applied to analyze the effect of firm performance on the linguistic variation in CAR discourse. We found that firm performance can significantly affect the linguistic variation in CAR discourse. CAR discourse from firms with good performance is more reliable. The result reveals managements’ use of concealment strategy in impression management. This study has implications for MD analysis, business discourse analysis, language pedagogy and accounting research.

Customer engagement in social media: a framework and meta-analysis

This research examines customer engagement in social media (CESM) using a meta-analytic model of 814 effect sizes across 97 studies involving 161,059 respondents. Findings reveal that customer engagement is driven by satisfaction, positive emotions, and trust, but not by commitment. Satisfaction is a stronger predictor of customer engagement in high (vs. low) convenience, B2B (vs. B2C), and Twitter (vs. Facebook and Blogs). Twitter appears twice as likely as other social media platforms to improve customer engagement via satisfaction and positive emotions. Customer engagement is also found to have substantial value for companies, directly impacting firm performance, behavioral intention, and word-of-mouth. Moreover, hedonic consumption yields nearly three times stronger customer engagement to firm performance effects vis-à-vis utilitarian consumption. However, contrary to conventional managerial wisdom, word-of-mouth does not improve firm performance nor does it mediate customer engagement effects on firm performance. Contributions to customer engagement theory, including an embellishment of the customer engagement mechanics definition, and practical implications for managers are discussed.

Exploring the relation between family involvement and firms’ financial performance: A replication and extension meta-analysis

This study replicates and extends the meta-analyses on family firm performance by O’Boyle et al. (2012). Based on the empirical findings of 1095 primary studies from 61 countries, we find an economically small but statistically significant positive impact of family influence on firms’ financial performance. This outperformance occurs particularly for large and listed firms, as well as for accounting rather than market performance measures. Furthermore, we investigate the potential moderation effects of different country cultural dimensions, as operationalized by the Hofstede and GLOBE framework. We find higher family firm performance effects for countries with a higher degree of individualism, masculinity, long-term orientation performance orientation, and a lower degree of power distance. We find only small differences in the mean effect sizes of family firm performance across different academic disciplines.

Mediation role of business value and strategy in firm performance of organizations using software-as-a-service enterprise applications

Firm performance impact arising from capabilities enabled by software-as-a-service enterprise applications (SaaS EA) has been the subject of limited research. By drawing on the resource-based view and competitive strategy theories, this study builds a model that (1) explains the firm performance effect of firm capabilities supported by SaaS EA and (2) clarifies the role of business value and strategy by acting as mediators between them. The model and its hypotheses are empirically tested through a survey of 257 company managers in a southern European country, confirming the importance of those mediators in firm performance.

The influence of firm performance and (level of) assurance on the believability of management's environmental report

PurposeThis study empirically examines perceptions of environmental report believability based on a firm's relative performance and level of assurance obtained on environmental activities under the recently clarified and recodified attestation standards in the United States.Design/methodology/approachThe paper uses a 2 × 3 between-subjects experiment to identify differences in 153 non-expert environmental report users' perceptions of report believability based on positive or negative firm performance and (level of) assurance provided by an accounting firm.FindingsResults show a main effect in that negative performance reports are perceived to be more believable than positive performance reports, as driven by negative performance reports being significantly more believable when no assurance is present. The firm performance effect is eliminated once limited or reasonable assurance is provided. Further, positive performance reports with limited, but not reasonable, assurance are perceived to be more believable than reports without assurance. No differences are identified within the negative performance condition.Practical implicationsLimited assurance might be used as an impression management tool to enhance the believability of positive performance environmental reports. Users, practitioners, and standard-setters should also be aware that users might believe environmental reports are assured, even when no such assurance has been provided.Originality/valueThis paper examines the impact of assured environmental reporting on users that review firms' environmental reports outside of a shareholder/investor role. The study also demonstrates conditions in which firm performance and assurance impact perceptions of report believability.

A path analysis investigation of the relationships between CEO pay ratios and firm performance mediated by employee satisfaction

We posit that information about CEO pay ratios is important to investors because employees' perceived fairness of their firm’s CEO pay ratio has consequences for firm performance. We use path analysis to examine the association between firm performance and (1) the predicted CEO pay ratio as determined by economic factors (the fair component of CEO pay ratio) and (2) the predicted CEO pay ratio as determined by non-economic factors (the unfair component of CEO pay ratio). We test for the existence and relative importance of direct and indirect paths using two measures of employee satisfaction and two measures of firm performance. We find that pay equity, a larger CEO pay ratio driven by economic factors, is associated with employee contributions to better firm performance. Conversely, we show that pay inequity, a larger CEO pay ratio driven by non-economic factors, is associated with employees' contributions to poorer firm performance. Consistent with the view that managerial entrenchment may amplify the negative effects of the CEO pay ratio, we find that the negative indirect path between pay inequity and firm performance, mediated by employee satisfaction, is more pronounced in firms with entrenched CEOs. Our findings contribute to the accounting compensation literature because they are consistent with CEO pay ratio information having economic consequences.

Corporate investor confidence in the aftermath of a mega natural disaster: An empirical study of the 2008 Wenchuan earthquake

Previous studies show that extreme disasters, such as earthquakes, have enormous impacts on individual and organizational behavior, including self-protection. While such experience is important for risk control processes, the influence of disasters on corporate performance and stakeholder perceptions, especially that of investors, has not yet been investigated. Investment behavior however is a key factor in the recovery process. How the corporate world reacts after a disaster is an indicator for the renewal and revival ability of the affected economies and their long-term sustainability.This study contributes to understanding post-disaster corporate investor confidence by investigating how the distance from the severely affected area influences corporate investor confidence. By analyzing 98 publicly listed companies located in the disaster areas of the 2008 Wenchuan earthquake, the analysis finds that during 2008–2013 both geographical and temporal distances serve as promoters in influencing the post-disaster investor confidence. Moderating effects of firm performance and industry risk on the relationship between disaster distance and post-disaster investor confidence are identified. The paper also outlines possible future research directions.

Intellectual capital and firm performance in the Indonesian non-financial firms

This study analyzes the effect of intellectual capital and firm performance in non-financial firms. The firm performance comprises of market performance and financial performance of the firm. This study also breakdown the non-financial firms between three sectors that are the primary sector, manufacturing sector, and service sector. The three sectors are the three main sectors in the economy. This study measures intellectual capital in different ways using the intellectual capital index. The data were analyzed with unbalanced panel data regression and multiple regression. This study found that intellectual capital positively affects market performance and financial performance in non-financial firms. This study also found that intellectual capital positively affects market performance and financial performance in manufacturing and service firms, but in primary sectors, this study found inconclusive results when analyzed and used two different measurements. This study contributes to the firms in non-financial firms about the development of intellectual capital in the knowledge-based economy because intellectual capital is an asset that can create market performance and financial performance. JEL Classification: G32, O34 How to Cite: Sofian, Dwijayanti, S. P. F., & Wijaya, H. (2020). Intellectual capital and firm performance in the Indonesian non-financial firms. Jurnal Keuangan dan Perbankan, 24 (1), 106-116. DOI: https://doi.org/10.26905/jkdp.v24i1.3574

Types of director, board diversity and firm performance

PurposeThe purpose of this paper is to investigate the effect of board diversity on firm performance.Design/methodology/approachFrom different theories perspective and based on data collected about the composition of board of directors in Spanish non-financial firms, the paper determines statistically the relationship between board diversity and performance for the period 2005-2015.FindingsThe results reveal differences between inside and outside board members in terms of the performance impact of board diversity. Thus, while age diversity has a positive effect on firm performance in both, insider and outsider directors, nationality mix is associated with higher performance levels just in the case of insiders. In addition, educational diversity seems to have a negative effect on performance for supervisory directors. On the contrary, the authors do not find any evidence about a possible influence of gender diversity on performance.Research limitations/implicationsThe authors are just taking some board’s attributes, but the concept of board diversity is a very wide one. In this regard, less traditional methodologies that do not rely on extant archival databases may be necessary to get a deeper understanding of the impact of boards on firm’s performance.Practical implicationsThis study demonstrates that the claim of “one size fits all” often implicitly stated by regulators and advisors is misleading. Board’s attributes analysis over the boardroom as a whole turns out in too simplistic conclusions. This is particularly important for regulators: a rigorous analysis should be performed before including general recommendations about, for instance, the age or the board tenure in corporate governance codes.Social implicationsAs diverse boards contribute to a greater social value, the paper analyses the performance consequences of demographic diversity.Originality/valueThe paper analyses the firm performance impact of diversity among insider directors, on the one hand, and outsider directors, on the other. Although there is a clear difference between the roles assigned to insider and outsider directors, to the authors’ knowledge, there has been no analysis of the firm performance effect of the diversity of each type of director using the same sample and methodology.

Corporate governance and performance: An analysis of Italian listed companies

In recent years, both corporate governance and performance management have been subjected to considerable changes. In this dynamic context, it is interesting to study the evolution of the relationship between performance and governance. Does governance still affect performance? The purpose of this paper is to verify the presence and intensity (extent) of the relationship between corporate governance and performance in Italian listed companies by using both accounting and non-accounting performance measures. The purpose of this paper is to investigate the effects of prior firm performance on board composition and governance structure of some companies listed on the Italian stock exchange, analysing how a governance approach influences the performance of sample companies. For the research the methodology used is quantitative and we used regression analysis on a sample of 23 Italian listed companies: mechanical companies and public utilities to find that the company's performance was positively related to the size of the board. The empirical analysis conducted allowed us to verify the hypothesis according to which the increase in Corporate Governance Best Practices influences company performance. However, the results we have received do not allow us to arrive at completely unequivocal interpretations. The results showed we have received do not allow us to arrive at completely unequivocal interpretations; the main limit is the sample size used in this study was relatively small.

Effects of Coopetition on Firm Performance and Implications for Economic Growth for SADC Countries

Competing and collaborating with competitors at the same time (coopetition) has proved to be an effective strategy for SMEs in developing countries. The strategy aids in the survival of small business through resource sharing, knowledge transfer and innovation performance. This article aims to highlight the importance of coopetition through theoretical and empirical evidence by studying 355 companies in SADC countries to examine the effect of collaboration on firm performance and to further infer coopetition as a driver for economic growth through firm performance in SADC countries.

Editorial: Corporate governance through a prism of multi-disciplinary research

This volume of the journal “Corporate Ownership and Control” is focused on corporate governance, corporate social responsibility, earnings and performance management, ownership concentration, institutional ownership, audit fees, audit quality and independence, cross-cultural management and cultural dimensions, financial instruments risk disclosure, equity incentives, firm performance, shareholder composition and monitoring effects, etc. The topics addressed in this issue highlight the continuing need for knowledge present in academic and non-academic research. The papers published in this issue offer an additional point of view with regard to the most important corporate governance issues.

The transformation effect of R&D subsidies on firm performance

PurposeThe purpose of this paper studies the transformation effect of research and development (R&D) subsidies on firm performance in emerging economies from the perspective of capital and product markets. It also studies the mechanisms behind R&D subsidies’ transformation effect.Design/methodology/approachThis study mainly explores the transformation effect of government R&D subsidies on corporate performance and its non-linear characteristics using Chinese A-share listed companies’ data from 2008 to 2016. The authors use the instrumental variable method to reduce endogenous problems and conduct a series of robustness tests to support the conclusions. The mechanisms of the transformation effect are explored via mediation effect models. The impact of firm heterogeneities on the transformation effect is also addressed.FindingsResults indicate that R&D subsidies promote firm performance and experience obvious transformation effects only within a “moderate interval.” R&D subsidies play a vital role in enhancing firm performance mainly via two mechanisms, namely, signal financing and innovation incentives. Further, the transformation effect is much greater in non-state-owned, young and large enterprises.Originality/valueThis paper contributes to understanding how R&D subsidies affect corporate performance from the perspective of capital and product markets by applying the linear and non-linear techniques that can clarify the relationship between the selected variables under study. The findings of this study might be helpful to identify the right directions for the government to implement and promote the R&D subsidy policies more effectively.

Enterprise risk management and firm performance: Role of the risk committee

In recent years, there have been increasing efforts in the corporate world to invest in risk management and governance processes. In this paper, we examine the impact of Enterprise Risk Management (ERM) on firm performance by examining whether firm performance is strengthened or weakened by the establishment of a board-level risk committee (BLRC), an important governance mechanism that oversees ERM processes. Based on 260 observations from FTSE350 listed firms in the UK during 2012–2015, we find the effectiveness of ERM significantly and positively affects firm performance. We also find strong BLRC governance complements this relationship and increases the firm performance effects of ERM. Our findings suggest the mere formation of a BLRC is not a panacea for ERM oversight; however, existence of a structurally strong BLRC is crucial for effective ERM governance.

The Roots of Corporate Transparency: A Mediated Moderation Model to Predict Foreign Institutional Investment

ABSTRACTThis study analyzes the dynamics of attracting foreign institutional investment, using the mediated moderation approach to investigate whether corporate transparency can mediate the interactive effects of firm performance and family or policy on foreign institutional investment. This study has several findings. First, corporate transparency does not mediate the relationship between firm performance and foreign institutional investment. Second, firm performance can interact with the policy effect to affect foreign institutional investment. Third, based on the second finding, a further test found that the mediating process through corporate transparency does not account for the moderation effect of policy on the relationship between firm performance and foreign institutional investment. The findings can provide academics, practitioners, and policy makers with evidence regarding the role of firm performance and corporate transparency, as well as the effects of family and policy in encouraging foreign institutional investment.

How do board ties affect the adoption of new practices? The effects of managerial interest and hierarchical power

AbstractResearch Question/IssuesMost extant literature implicitly equates obtaining information through board interlocks to acting on the information. We investigate triggers that help to translate the information into action. In addition to exposure to the information by board interlocks, we suggest that the self‐interest of the individuals who create these ties and hierarchical power of interlinked firms determines the likelihood of taking actions of adopting new practices.Research Findings/InsightsUsing the action of adopting two distinctive governance practices, stock option pays or board reform, we find that sent ties and received ties affect the adoption decisions differently. Whereas sent ties reflect managerial interests, received ties derive power from a hierarchical relationship between the focal firm and the interlinked firm. Such differential nature of sent and received ties drives a differential result in terms of adopting two distinctive governance practices. We also find support for different moderating effects of firm performance on the impact of sent and received ties.Theoretical/Academic ImplicationsIn this study, we incorporated the self‐interest of executives with sent ties to prior adopters and the power of directors who establish ties with prior adopters that are hierarchically positioned. By doing so, this study paints a more fine‐grained picture regarding underlying mechanisms by which information gained through ties is translated into action. This provides important insights for both agency theory and resource‐dependency theory.Practitioner/Policy ImplicationsHierarchical board ties are not a unique phenomenon in Japan. We often find such ties in business groups in China, India, Korea, and some European countries. Establishing board interlocks among subsidiaries in a business group is an important governance resolution for controlling the whole business group. Hence, our findings that the ties carry not only information but also agent's interest and hierarchical power should be taken into account when a business group designs board interlocks.

The effects of firm size and firm performance on CEO pay in Canada: A Re‐Examination and Extension

AbstractUsing insights from academic and practitioners' perspectives and recent data, this paper extends the literature by using pay variables that are typically used by practitioners, including those not studied in previous academic research. Consistent with previous findings, firm size, measured by three‐year average revenues, has strong effects on CEO pay. However, the relationship is not the same for firms of different sizes. Revenue elasticity is strong among small companies and disappears for medium and large companies. Firm performance, measured by accounting‐based measures (return on assets and return on equity), and market‐based measures (total shareholder return and shareholder value), have little effects on CEO cash compensation, but strong positive effects on equity compensation. Implications for research and practice are discussed.