Conventional Firms Research Articles

Does Islamic Label Indicate Higher use of Trade Credit? Evidence from Shar¯ı‘ah Compliant Non-financial Firms in Pakistan

This study attempts to investigate the behavior of non-financial ISL firms towards usage of TC. In line with the previous literature, it is hypothesized that ISL “Shar¯ı‘ah Compliant” indicates higher use of TC by such firms, both demand and supply of TC. It is also hypothesized that TC is substitute of bank loan. The results are based on 338 non-financial firms listed on Pakistan Stock Exchange for 2008 to 2016 observation period. These include non-financial firms from all sectors. The study used random Generalized Method of Moment (GMM) estimation technique to explore the relationship of ISL and usage of TC as it is the most powerful method when sample size is large. The study found that ISL firms use more TC, as compared to conventional firms that have more access to bank loan. This study also found that firms with ISL prefer TC over the bank credit. The result of this study proves all stated hypotheses.

Employee ownership in companies in Cameroon

PurposeThe purpose of this paper is to examine the impact of employee ownership (EO) on the creation of shareholders’ wealth in companies in Cameroon.Design/methodology/approachThe methodological approach adopted is hypothetical-deductive. The sample includes 89 companies, of which 31 practiced EO policy for at least ten years. Information used come from secondary data collected over the period 2008–2013 at the National Statistical Institute of Cameroon. These data were analyzed through a time series cross-sectional regression, corrected for any latent heteroskedasticity and serial auto-correlation.FindingsThe paper finds that the average level for participation of employee in the capital is 7.4 percent and the average wealth creation of shareholders is 26 percent of invested equity. However, this average rate of creation of shareholders’ wealth is higher in companies with EO (45 percent) than in conventional firms (16 percent). For the results of model estimates, the percentage of capital held by employees affect positively and significantly at 1 percent the return on equity. This study concludes that EO is a lever for creation of shareholders’ wealth in companies in Cameroon.Practical implicationsFindings of this research can serve as framework for reflection by politicians, managers and business leaders as they will have a strategic management tool capable of improving the social climate in companies and also promoting shareholders’ wealth creation. It is a formula that would allow them combining economic and social realities of organizations.Originality/valueNo similar review has been done before in Africa in general and Cameroon in particular. Study was carried out in a context where financial market is not developed.

The internationalization of port managing bodies in concept and practice

ABSTRACTThis paper aims to establish a framework being conceptually able to explain a variety of internationalization strategies and related activities employed by port managing bodies (PMBs), as defined by the European Sea Ports Organisation (ESPO) in 2018, considering their hybrid nature. Having identified a potential to further the existing literature on port policy and strategy in general and port internationalization strategy in specific, the paper examines theoretical frameworks and methodologies from the literature on international business that could be applicable to this field.The main objective is to define a conceptual and analytical framework to examine PMB international strategies, which include both inward and outward steps, also discriminating various internationalization patterns (operating modes). In particular, we investigate if the success (or failure) of PMB outward operations is affected by inward (previous) steps.The contribution tests and validates the proposed conceptual model through multiple embedded case studies, which originate from diverse economic and institutional settings in Rotterdam, Shanghai and Singapore. The paper provides a meaningful insight into discrepancies that could exist in internationalization strategies adopted by conventional business firms and PMBs since they are envisaged to show different trajectories in a number of areas.

Assessing employee-owned firms: an examination of the Spanish economic model

Employee-owned firms (EOFs) form part of the so-called social economy, and they are seen as an alternative business model that aims to establish itself as a third way, different to conventional capitalist firms and public enterprises. These firms meet the Spanish legal requirements (Law 44/2015) for employee ownership designation. This paper assesses whether the capital ownership structure is a key factor determining operating performance, productivity and solvency, or in other words, the impact the firm’s capital ownership structure may have on its economic performance, labour factor and capital factor. Based on a sample of small employee-owned firms and non-employee owned firms, the study develops an empirical methodology using a panel data analysis. The study shows the characteristics of Spain’s EOFs as an alternative legal form of employee share ownership, which is included in the Social Economy, but different from cooperative societies.

Contributing Factors in the Use of Leverage in Islamic Banks

This paper aims to apply the theories on firm and bank capital structure on Islamic banks and identify contributing factors that are signficant in the use of leverage in Islamic banks. For this purpose, a 10-year panel data of 34 listed Islamic banks from 12 countries is used. In addition to studying the significance of several contributing factors for the use of debt that have been found to signficantly influence the leverage in conventional firms and banks (Frank & Goyal, 2009; Sorokina, 2014)and Islamic banks (Bitar, Kabir Hassan, & Hippler, 2018; Thabet, Shawtari, Ayedh, & Ali, 2017) in past studies, several additional potential factos unique to Islamic banking business or related to legal and regulatory environement in the jurisdiction are tested. The results showed that standard coporate finance factors for leverage are applicable on Islamic banks. Similarly, Islamic banks with low profitability and earning volatility as well as high collateral and growth propects have higher leverage. It is observed that share of investment accounts in liabilites, regulations and debt market conditions are also signficant factors.

Compensating international mobility in a workers’ cooperative: An interpretive study

This study uses an interpretive research design to analyze how worker-members in cooperatives understand and handle the challenge of designing a compensation system for their international workforce. The empirical study, conducted in a cooperative belonging to the Mondragon Corporation, reveals how such a challenge is understood as one of finding a system that combines international business performance with the need to uphold and maintain the cooperative’s identity. Drawing on that understanding, the cooperative adopts a number of management decisions and criteria for the distribution of rewards and the justification of unequal working conditions among its international assignees that are very different to the mainstream ones in conventional firms. The study’s findings are an invitation to question many of the traditional theoretical assumptions and practices involved in global compensation, prompting the need to develop theories and research initiatives in this field that are more in keeping with the needs and characteristics of social enterprises.

COMPARATIVE EFFICIENCY OF AGRICULTURAL COOPERATIVES AND CONVENTIONAL FIRMS IN A SAMPLE OF QUASI‐TWIN COMPANIES

ABSTRACTThe resilience of cooperatives and their positive contribution to employment in times of crisis is well established. However, their overall economic performance relative to conventional firms is still controversial, casting doubt on the ability of this alternative organizational form to govern the fundamental drivers of productivity. To shed new light on the issue, we study the comparative technical efficiency of agricultural cooperatives (ACs) and conventional firms (CFs), drawing on a unique data set comprising all wine‐producing companies in Sardinia (Italy) from 2004 to 2009. Due to the similarity of the habitats in which the firms operate and the careful measurement of several key inputs, the observed units are ‘twins’ in all non‐organizational respects, providing an ideal setting for comparison. Having generated efficiency scores through Data Envelopment Analysis (DEA), we regressed the scores on external covariates and ownership type using a pooled truncated maximum likelihood formulation. Our findings, which survive correction for spatial correlations, indicate that cooperatives are less technically efficient than their capitalist counterparts and struggle more to adapt to extreme weather fluctuations. Both results are particularly worrying in light of the main challenges facing the wine industry in the near future: liberalization of EU planting rights and climate change.

Why do closed-end funds repurchase stock?

With special institutional characteristics and regulatory requirements, what factors can motivate UK closed-end funds to engage in open-market repurchases? Investigating repurchase transactions on financial-year basis, I find that funds repurchase shares to reduce discounts and to increase the net asset value per share, as directors claim, but not to increase fund liquidity. I also find that funds repurchase shares to increase leverage ratios. Unlike conventional firms, neither distributing excess cash nor substituting dividend payouts promote fund repurchases. Fund size has a negative effect on repurchase decision.

The Governance of Foundation-Owned Firms

Despite the extensive attention paid to corporate governance in the literature of both law and economics in recent years, empirical work to date has largely failed to establish a link between formal governance structures and economic performance. In this paper, we explore the relationship between corporate governance structures and economic performance in a setting that is, in important respects, more favorable than the publicly-traded U.S. business corporations that are the typical focus of previous research. We work with a rich data set comprising 121 Danish industrial foundations, which are industrial companies controlled by autonomous nonprofit foundations. These industrial foundations have several important advantages as subjects of study. First, by conventional measures, the industrial companies perform, on average, as efficiently as their investor-owned counterparts – a remarkable fact, given their ownership structure. Second, because the management of the companies is ultimately in the hands of a self-perpetuating board of directors that is free of control by outside owners, the impact of the firm’s internal governance structure on managerial decision-making, and hence on company performance, should be both more intense and more easily isolated than in conventional investor-owned firms. Third, the industrial foundations display broader variance in internal governance structures than do U.S. business corporations. We focus in particular on a composite structural factor we term “managerial distance.” We interpret this as a measure of the clarity and objectivity with which a firm’s top managers are induced to focus on the operating company’s profitability. More particularly, managerial distance seems best interpreted as a factor, or aggregate of component factors, that put the firm's top managers in the position of “virtual owners,” in the sense that the information and decisions facing the managers are framed for them in roughly the way they would be framed for true owners of the firm. Our empirical analysis shows a positive, significant, and robust association between managerial distance and company economic performance. The findings appear to illuminate not just foundation governance, but corporate governance more generally.

Malaysian Acquiring Firms' Shareholders' Wealth Effect Following Cross-Border Acquisition

Purpose: The purpose of this study is to investigate long run shareholders' wealth effect (SWE) of Malaysian acquiring firms following cross-border acquisition (CBA).
 Methodology: Using buy-and-hold abnormal returns (BHAR) measure of SWE and Euclidean distance method for identifying matching firms, the study investigated 176 CBA deals of Malaysian acquiring firms for the years 2004-2015. Both parametric tests (such as conventional t-statistics, skewness adjusted t-statistics, bootstrapping skewness adjusted t-statistics and Multivariate of Analysis of Variance) and non-parametric statistical (such as Wilcoxon-Mann-Whitney test) tools were employed to analyze the data and test the hypotheses regarding the impact of CBA deals on acquiring firms' SWE.
 Results: The research found that the SWE of acquiring firms is significantly positive in the shorter period while negative or mixed in the longer period. Furthermore, SWE is found to be different across several groups: (i) Shariah-complaint status firms vs. conventional firms (ii) level of control in target firm (such as major vs. minor acquisitions), (iii) Diversifying acquisition (for example, related vs unrelated acquisition). However, SWE does not differ from industry to industry.
 Implications: This research presents unique empirical evidences related to long run SWE of Malaysian acquiring firms following CBA. The findings imply that CBA is more success in the longer period.

Wage inequality in workers’ cooperatives and conventional firms

Wage inequality in workers’ cooperatives and conventional firms

Sustainable business models as boundary-spanning systems of value transfers

Sustainable innovation requires collaboration across organizational boundaries, hence in this research, we take a boundary-spanning perspective on the business model. This perspective focuses on how value is created and captured across organizational boundaries, by investigating the value transfers between the focal organization and the external network of business model actors. We analyze the business models of 64 innovative sustainable organizations from The Netherlands in terms of how environmental and social sustainability is manifested in the content, structure, and governance of their business models. We find that environmental sustainability is mainly represented in value creation content, whereas social sustainability is achieved by serving underprivileged user groups and mainly is reflected in value capture content. We observe that social sustainability in both for-profit and non-profit organizations is often achieved by having an imbalance in value exchanges that is compensated elsewhere in the business model. In terms of business model structure we show that sustainable organizations use the same underlying business model structures as can be found in conventional firms. All in all, we demonstrate that analyzing the environmental and social sustainability of organizations using the boundary-spanning perspective on business models provides complementary insights to the traditional component-based view of the business model.

Wage differentials between conventional firms and non-worker cooperatives: Analysis of evidence from France

The aim of this article is to investigate the wage differentials between conventional firms and non-worker cooperatives, which has seldom been done in the literature to date. Using French administrative data, the determinants of these wage differentials are analysed. This investigation is carried out across all industries and is then repeated for the banking industry. Taking all industries into account, conventional firms offer lower wages than cooperatives. Most of this pay gap is explained by differences in the characteristics of the employees, jobs and companies. If the focus is narrowed to firms in the banking industry only, it becomes clear that conventional firms pay higher wages than cooperatives but that this gap is explained solely by differences in characteristics. However, their impact is weakened somewhat by differences in the value attributed to these characteristics, which work in favour of employees in cooperatives.

Sustainability Experiments in the Agri-Food System: Uncovering the Factors of New Governance and Collaboration Success

In recent years, research, society and industry recognize the need to transform the agri-food system towards sustainability. Within this process, sustainability experiments play a crucial role in transforming the structure, culture and practices. In literature, much attention is given to new business models, even if the transformation of conventional firms toward sustainability may offer opportunities to accelerate the transformation. Further acceleration could be achieved through collaboration of multiple actors across the agri-food system, but this calls for a systems approach. Therefore, we developed and applied a new sustainability experiment systems approach (SESA) consisting of an analytical framework that allows a reflective evaluation and cross-case analysis of multi-actor governance networks based on business and learning evaluation criteria. We performed a cross-case analysis of four agri-food sustainability experiments in Flanders to test and validate SESA. Hereby, the key factors of the success of collaboration and its performance were identified at the beginning of a sustainability experiment. Some of the key factors identified were risk sharing and the drivers to participate. We are convinced that these results may be used as an analytical tool for researchers, a tool to support and design new initiatives for policymakers, and a reflective tool for participating actors.

An Empirical Analysis of the Influence of Entrepreneurial Orientation on Franchisees’ Outlet Performance and Intention to Stay

Purpose - Although literature has established the relevance of entrepreneurial orientation(EO) in the performance of conventional firms, the constraining nature of franchise arrangement makes one wonders if the same relationship holds for companies operating under the business model. Research design, data, and methodology - Using Nigeria - a country with high potential for franchise growth - as a context, this study aims to explore the relevant entrepreneurial orientation skills exhibited by franchisees and show the extent to which these skills influence their business performance and intention to remain. 26 franchisees purposively selected from six local franchise brands in Nigeria were interviewed. Result and Conclusions - The three classic entrepreneurial orientation factors of innovativeness, proactiveness and risk-taking were found to have varying influence on franchisees' business outcomes. This study answers the calls for more in-depth understanding of the relationship between EO and firm performance generally and, franchise firm performance in particular. The value of this effort lies in the fact that it strengthens theory and updates literature on the subject. Based on the findings, specific recommendations are offered to help improve the practice of franchising in Nigeria.

The neglect of society in the theory of the firm: a systems-theory perspective

The prevailing theories of the firm acknowledge the importance of trust and loyalty but neglect such behaviour in the substance of their analyses. The present paper unravels this paradox by drawing on Niklas Luhmann’s ground-breaking insight that the complexity-reducing function of social systems leads them to neglect their critical environmental dependencies, thereby compromising their own sustainability. If the firm is conceived as a social system, Luhmann’s theory implies that the neglect of social behaviour by the predominant theories of the firm can be explained as reflecting the neglect of society by actual firms. This argument promises to not only furnish the theory of the firm with a concern for sustainability, but also render it more amenable to unconventional institutions, such as cooperatives and non-profit organisations, that help compensate for the damage inflicted by conventional firms on the social environment.

The Other Side of Value: The Effect of Quality on Price and Return in Real Estate

We examine the effect of quality on price and return in real estate. Quality real estate stocks generally trade at higher prices. However, similar to findings in the aggregate stock market (Asness et al. 2013), quality in listed real estate is not fully reflected in price. A long quality, short junk portfolio (QMJ) is found to produce average risk-adjusted returns of 3.6 % per quarter (14.4 % annually). QMJ has a significantly positive coefficient when added as a dependent variable to a 4-factor model explaining U.S. real estate excess returns, including market, size, value and momentum factors, and leads to a small improvement in the overall fit of the model. Further investigation of the components of quality shows that profitability has a consistently positive relationship with real estate excess returns, while higher dividend payout is consistently associated with lower returns, in contrast to findings for conventional firms.

Equality Under Threat by the Talented: Evidence from Worker-Managed Firms

Does workplace democracy engender greater pay equality? Are high-ability individuals more likely to quit egalitarian organisational regimes? The article revisits this long-standing issue by analysing the interplay between compensation structure and quit behaviour in the distinct yet underexplored institutional setting of worker-managed firms. The analysis is based on novel administrative data sources, which allow constructing a simple ordinal measure of the workers' ability type. The article's key findings are that worker-managed firms have a more compressed compensation structure than conventional firms, and high-ability members are more likely than other members to exit.

Examining the link between organizational democracy and employees’ moral development

While much is understood about the role of the family context and educational experiences for moral development, less attention has been devoted to the occupational context. In this research, we used Kohlberg’s approach of moral education as a framework and investigated the relationship between structurally anchored organizational democracy and employees’ moral development. Employees (N = 285) of five conventional (i.e., traditionally owned and hierarchically managed) and five democratic (i.e., collectively owned and democratically managed) enterprises participated in our study. Consistently with our theoretically derived hypotheses, the results provide initial support for the theoretical model in that employees from democratic firms scored higher on moral development than employees from conventional firms. In turn, contrary to our expectations, the socio-moral climate within organizations failed to explain variance in moral development. Theoretical implications of our findings as well as suggestions for future research are discussed.

Long‐Term post‐merger announcement performance. A case study of Australian listed real estate

AbstractThis study examines the long‐term postmerger performance of Australian Real Estate Investment Trusts (A‐REITs). The A‐REIT sector is used as a case study being less vulnerable to agency issues due to its regulatory structure (Eichholtz and Kok, 2008; Ratcliffe et al., 2009). Research on conventional firms has shown, on average, shareholders are worse off in the long run (Alexandridis et al., 2012). In contrast, we find that shareholders experience significantly positive abnormal returns, after accounting for the financial crisis. This outcome suggests that when managers are restricted with the use of retained earnings and the type of investment, they may be less susceptible to hubris and/or agency issues.