Financial Performance Relationship Research Articles

Human capital and financial performance of Islamic banks: a meta-analysis

Purpose This paper aims to meta-analyze the results of the prior studies related to the relationship of human capital and financial performance in Islamic banking. Design/methodology/approach To examine the relationship between human capital and financial of Islamic banks, 23 empirical studies having sample of 15,607 are considered for the meta-analysis. Moreover, different measures related to financial performance including return on assets (ROA), return of equity (ROE) and Tobin’s Q have been taken as moderating for further subgroup analysis. Findings The results of meta-analysis reveal a positive correlation between human capital and financial performance with an effect size of 0.268. The subgroup analyses showed significant positive associations of human capital with ROA and ROE, insignificant with Tobin’s Q. Originality/value This study suggests Islamic banking should prioritize human capital development, maintain consistency and adopt a long-term perspective. Future research should consider context-specific factors and harmonize human capital and financial performance measurements for consensus.

Does Company Information Environment Affect ESG–Financial Performance Relationship? Evidence from European Markets

This study investigates the relationship between ESG and financial performance and explores the influence of firms’ information environment on this relationship. To do this, we construct an information environment index from several proxy measures, evaluate ESG performance using Refinitiv’s ESG scores, and evaluate financial performance using return on assets and Tobin’s Q. We find that the information environment index has a positive relationship with both return on assets and Tobin’s Q ratio. On the contrary, ESG has a negative association with return on assets but a statistically insignificant relationship with Tobin’s Q. The negative relationship of ESG with return on assets is convex and weaker in companies with better information environments. We also show that in firms with high asset turnover ratios, ESG does not harm profitability. Separately examining the ESG components reveals that each similarly relates to profitability but that governance has a less negative impact. Our study reveals non-linearities in the relationship between ESG and financial performance that can help companies set better targets and implement better practices about ESG. The moderating effect of the information environment reveals the importance of information dissemination in preventing ESG practices from creating unfavorable consequences. This study may shed light on a more effective ESG policy by showing ways to reduce the adverse financial effects of ESG practices.

Responsible risk-taking and the CSP-financial performance relation in the banking sector: A mediation analysis

In this study, a mediation analysis is conducted using data for 394 banks listed in 54 countries from 2002 to 2017 with the aim to investigate the role of bank risk-taking as a mediation channel to explain the CSP–financial performance relationship in the banking sector. Results show that stronger CSP is associated with improved financial performance and this relationship is partially mediated by bank risk-taking, with CSP increasing financial performance through the reduction of bank risk. Adopting more prudent—less risky or speculative—banking practices is a key method through which banks can embody social responsibility, given the systemic importance of bank stability. However, such banks tend to be more financially successful. The empirical results are consistent across various robustness checks, thereby supporting to the notion that corporate social responsibility (CSR) engagement helps banks to achieve a “win-win” situation—more profitable yet more responsible and less risky banks.

Analysing the Impact of Crises on Financial Performance: Empirical Insights from Tourism and Transport Companies Listed on the Bucharest Stock Exchange (during 2005–2022)

To adapt to the business environment, organisations adhere to management strategies capable of removing the effects of negative events, transforming themselves into resilient organisations. Physical and mental difficulties are the consequences of recent corporate developments, and protecting these organisations is a significant concern for managers. Using regression analysis of panel data, we evaluate the effectiveness and performance of 34 tourism and transport companies listed on the BSE in the 2005–2022 period by testing the effect of leverage on financial performance. Then, we focus on identifying the effects of recent crises (the global financial crisis of 2007–2008 and the COVID-19 pandemic) on financial performance and, implicitly, on organisational resilience. The findings suggest that the research hypotheses were partially validated, noting that the indicators included in the study registered significant decreases for the COVID-19 crisis period compared to the global financial crisis period. The paper provides information on measuring the resilience of companies through their ability to withstand the global financial crisis and the crisis triggered by the COVID-19 pandemic. This study is also among the first to examine the role of financial crises in the leverage and financial performance relationship in Romania.

Do agency costs and business risk affect the corporate sustainability–financial performance relationship?

PurposeThe aim of this research is to examine the effect of corporate sustainability performance on financial performance and the role of agency costs and business risk in determining this effect.Design/methodology/approachThis study uses the data of 83 non-financial Turkish firms listed on Istanbul Stock Exchange during the period 2014–2021. Two-step system GMM models are applied to examine the study’s hypotheses.FindingsThe results indicate a positive effect of corporate sustainability performance on financial performance, and that this effect is significant only for firms that are more likely to suffer agency costs of equity, firms with R&D expenditures and firms with lower business risk.Practical implicationsThe results of this study confirm the importance of regulations introduced by regulators to support the sustainability initiatives for firms that have less ability to access funds required for their investments. In addition, the findings provide important insight into the role of the persistence of corporate sustainability performance in enhancing financial performance through mitigating managers' opportunistic behavior.Originality/valueTo the author’s knowledge, this research is one of few that examine the effect of agency costs and business risk on the corporate sustainability–financial performance relationship in emerging markets.

The impact of taxation on firm performance and risk: Evidence from Greece

<abstract> <p>In this paper, I examine the relationship of taxation with performance and risk with the usage of a sample of 76 non-financial companies traded on the Athens Stock Exchange. The period covered by my study spans from 2018 to 2022, while correlation and panel data analysis is conducted. Both financial performance and stock return are considered, while risk concerns the volatility of the companies' share prices. The explanatory variables used concern figures reported both in the balance sheet and the profit and loss statement and include net deferred tax, deferred tax asset, deferred tax liability, total tax expense/revenue, income tax, and deferred tax expense/revenue. The empirical results reveal a positive relationship of financial performance with net deferred tax, total tax expense/revenue, income tax and deferred tax expense/revenue. Moreover, deferred tax asset is found to affect financial performance in a negative fashion, while deferred tax liability bears a positive influence on financial performance. The opposite relationships with deferred tax asset and deferred tax liability are detected in the case of stock return and risk. Finally, evidence of a negative relationship of total tax and income tax with stock risk is obtained.</p> </abstract>

Beyond the business case? Retracing the walk of Corporate social responsibility and financial performance relationship in the Oil and Gas sector

AbstractThe relationship between corporate social responsibility (CSR) and financial performance (FP) has not been thoroughly investigated in the literature. In particular, the nature of the relationship between the two constructs has not been investigated in depth. Therefore, drawing on the resource‐based view and Stakeholder theory, this study theoretically and empirically examined the relationship between economic perspective of CSR and FP analyzing the mediating role of competitive advantage under the empirical settings of the downstream Oil and Gas companies of Pakistan. Based on the 178 responses from the managerial level employees of these firms, the empirical outcomes stands with the assumption of the study that the implementation of CSR in the Oil and Gas industry is economically driven and have a positive relationship with FP, while competitive advantage partially mediates the relationship between economic CSR and FP. The outcomes of the study carry the important managerial and practical implications for Oil and Gas firms which are fallen in the business case.

Social venture performance, impact and strategic marketing effectiveness in turbulent environments

PurposeThe social venture (SV) is an increasingly popular form of organization to pursue social goals using a commercial approach. Although marketing plays an important role in SV research and a key driver of the performance of SVs, how and the extent to which market conditions play a role remains understudied. This study examines if market turbulence can moderate marketing capabilities and performance relationships.Design/methodology/approachThe authors developed several hypotheses rooted in the marketing literature and tested them using data collected from a sample of 109 SVs from East Asia (i.e. Hong Kong and Taiwan). Using multiple regression analysis and structural equation modeling, the authors analyzed the marketing capabilities and financial and social performance relationships and the positive moderating role of market turbulence.FindingsThe results suggested that market turbulence is a positive moderator which influences the effect of the marketing capabilities–financial performance relationship, but not the marketing capabilities and social performance relationship.Originality/valueThis paper attempts to interrogate the SV's marketing capabilities–performance relationship in the East Asian context and how market turbulence may enhance or weaken the relationship. This is one of the earliest papers in this research area. The key findings from this research offer valuable theoretical contribution to the study of SV performance.

Impact of Paradigm Shift in Corporate Social Responsibility from Voluntary to Mandatory on Corporate Financial Performance

This study aimed to find out the impact of a paradigm shift in corporate social responsibility on corporate financial performance. Developing an inclusive and prosperous society needs to reformulate the business-society nexus concerning social responsibility. Corporations are supposed to not only on economic priorities but on societal and environmental implications as well. In the present scenario business organizations must divert the profits to social obligations like medical & and education facilities, hunger & and poverty eradication, a pollution-free environment, and equality of gender. The government has been following constructive initiatives to formalize corporate responsibility toward society from voluntary guidelines to legal obligations. Keeping in view the historical legal reforms, the present study focuses on the empirical analysis of the association between CSR disclosures and corporate financial performance among Indian companies after the enactment of the amended Companies Act. The analyses highlight that companies’ CSR disclosures have a significant impact on their financial performances. The findings of the study are consistent with earlier research, where the CSR disclosure and financial performance relationship is positive. Several companies are engrossed in social obligations towards external and internal stakeholders, as spending on social responsibilities will ensure good financial health. The current research imparts empirical support as well as theoretical support and motivation for the corporate sector towards CSR initiatives.

Cruising to Success: Unveiling the Financial Harmony of Container Shipping Firms through Total Quality Management and Service Excellence

Background: This paper revolves around a meticulous exploration aimed at discerning the impact of total quality management (TQM) and service quality (SQ) practices upon the financial performance (FP) of firms within the container shipping industry. Our pursuit extends further, delving into the intricacies of SQ as a potential mediating factor in the TQM–FP relationship. This distinctive study investigated six TQM practices in conjunction with five SQ factors, analyzing their impact on firm FP. Methods: This study used a quantitative research approach. Data were collected through a structured questionnaire from logistics specialists and experts in the shipping field. Results: The findings were interesting and showed that two TQM practices—managerial leadership and employee involvement—have a significant positive effect on SQ levels, and one SQ dimension, namely responsiveness, has the biggest and most significant effect on the FP of container shipping companies. Furthermore, SQ mediates the relationship between TQM and FP. Conclusions: This study provides a theoretical contribution by developing a conceptual model that elucidates the correlation between TQM practices and the degree of SQ on the FP of container shipping firms. Moreover, this study provides managers with a tool for identifying, prioritizing, and improving key TQM and SQ practices that contribute significantly to financial success.

When Does It Pay to Be Good? A Meta-Analysis of the Relationship Between Green Innovation and Financial Performance

A rapid increase in environmental concerns has prompted firms to engage in green innovation. However, previous studies have found contradictory results for the relationship between green innovation and financial performance, thus offering us an opportunity to revisit the relationship using a meta-analysis method. By analyzing a sample size of 20 503 observations from 80 studies, in this article, we find a positive relationship between green innovation and financial performance. Moreover, the relationship is stronger in fast-clockspeed and close-to-consumer industries than in others and stronger in countries with a strong control of corruption and a long-term cultural orientation than in others. This article advances the understanding of the green innovation–financial performance relationship as well as of the role of research context as a moderator of that relationship.

Is short-term firm performance an indicator of a sustainable financial performance? Empirical evidence

PurposeThis study aims to thoroughly examine and understand the relationship between working capital management (WCM) and the sustainable financial performance (FP) in the context of the New Zealand companies listed on stock exchange.Design/methodology/approachThis study has applied various regression techniques to examine WCM and the sustainable FP relationship. The data set period is from 2009 to 2019. The results are robust upon various layers of robustness parameters. The system-generalized method of moments is applied for managing endogeneity issue.FindingsThe research reveals compelling evidence of a meaningful connection between WCM and sustainable FP indicators. The study specifically highlights the significant negative associations between the cash conversion cycle, average collection period and average age of inventory with the firm’s sustainable FP. Through robust analyses and various parameter adjustments, the study ensures the credibility and reliability of its conclusions, further reinforcing the impact of WCM on the financial health of New Zealand-listed firms.Practical implicationsThis study provides future directions for researchers to explore the dynamic relationship between WCM and a firm sustainable FP because it is still a demanding and challenging area. Future research may care to explore the optimal way to reduce the cash conversion cycle, average collection period and average age of inventory for New Zealand firms. The current study does provide insights to NZ financial managers, which is useful for improving sustainable FP by efficiently managing WCM.Originality/valueWCM is problematic and constitutes a notable challenge; it requires further research, especially in small economies such as New Zealand. Hence, it is an updated and fresh attempt based on a larger data set to measure the empirical relationship between WCM and the sustainable performance of New Zealand-listed firms. Furthermore, the current study uses dynamic panel data estimation techniques in addition to multiple regression techniques.

Unraveling the Complex Dynamics of Islamic Social Reporting and Financial Performance: A Study of Mediating and Moderating Factors in Islamic Banks

Islamic Social Reporting (ISR) is crucial for Islamic banks as it captures the extent of their adherence to social and ethical principles, which influences their financial performance. Drawing on stakeholder theory the primary objective of this study is to scrutinize the impact of ISR on the financial performance of Islamic banks in Indonesia, with a specific focus on the mediating and moderating roles of key governance factors, namely ownership concentration, bank size, board independence composition, and leverage. The study is based on data from ten Indonesian Islamic commercial banks from 2017 to 2020, utilizing regression models and Path SEM analysis for assessment. The findings reveal a positive impact of ISR on financial performance. Additionally, it is discovered that the board independence composition and leverage significantly moderate the ISR-financial performance relationship. However, the study does not find evidence of the mediating effects of ownership concentration and bank size. While the moderating roles of board independence composition and leverage align with prior research, the absence of mediation effects contrasts with previous studies. Originality/Value: This research offers a distinct exploration of the relationship between ISR-financial and financial performance relationship within the specific context of Indonesian Islamic banks. It creatively probes the mediating and moderating impacts of select governance variables, a largely unexplored territory in extant literature. The findings of this study contribute to the theoretical framework of ISR's influence on financial performance and provide actionable insights for policy and strategic decisions in Islamic banks. It underscores the potential of such studies to drive sustainable growth, thereby laying the groundwork for future research.

Rosalina, Linda Sustainable Finance in Financing Plantation Companies by Banking

Sustainable finance is a form of financing provided by Financial Institutions (FIs) to debtors by considering sustainability aspects into their decisions. Sustainable finance has not become a serious concern and orientation of FIs in providing credit or financing to debtors. Problem financing reflects the problem of two conflicting economic actors (agency). By conducting an analysis of sustainable financial performance and agency relationship analysis, this study shows that assessing the sustainability performance of a company (the debtor) required detail criteria and indicators of sustainable finance. When disbursing credit, banks cannot only look at the financial health and stability of a company. This is because companies that already have sustainability certification and fulfill administrative aspects still have unresolved Environmental, Social and Governance (ESG) issues. The involvement of the parties in building an “Information Hub” (coordination forum) related to ESG practices centered in the regions is important.

Corporate social responsibility expenditure and financial performance: the moderating role of family ownership

Purpose The paper aims to examine how Indian non-financial service sector companies’ financial performance is influenced by their corporate social responsibility (CSR) expenditures. The paper also analyses whether family ownership has a moderating role in the CSR expenditure–financial performance association. Design/methodology/approach The study includes 288 non-financial service sector companies listed in India with 3,456 firm-year observations. Panel data regression analysis using data for 12 years, starting from 2010 to 2021, is carried out. Findings The study reveals a positive influence of CSR spending on financial performance measures (Tobin’s Q and return on assets). Mandatory CSR policies also influence the company’s performance. Additionally, family ownership has a positive moderating effect on CSR expenditure–financial performance (Tobin’s Q). Research limitations/implications The study gives insights to the managers on how CSR expenditures can be used to maximise their benefits by supporting social causes, particularly in the case of firms with ownership structures where family involvement is there. Originality/value The prior studies analysing family ownership effect on the CSR–financial performance relationship are fewer, and in a country like India, where corporate philanthropy is a part of the family business culture, there is a need to understand how CSR spending influences firm performance.

Do fintech adoption and financial literacy improve corporate sustainability performance? The mediating role of access to finance

Corporate sustainability performance (CSP) has recently garnered considerable traction worldwide. Adopting industry 4.0 technologies such as financial technology (Fintech) and leveraging critical organizational resources are of great importance to the sustainability and performance of firms. This study draws upon the ecological modernization theory (EMT) and resource-based view (RBV) to assess the effects of a firm's Fintech Adoption (FA) and Financial Literacy (FL) on different dimensions of its sustainability performance. We also examine the mediating role of Access to Finance (AF) in the associations among these understudied variables. Empirical data was collected from 262 firms in the Bangladeshi apparel industry, and the CB-SEM approach was employed to assess the proposed hypotheses. The findings revealed that FA and FL are significant drivers of firms' sustainability performance. Additionally, access to finance was found to have a robust mediating impact on both the fintech adoption-sustainability performance relationship and the financial literacy-sustainability performance relationship. Moreover, the findings indicated that access to finance positively spurs a firm's sustainability performance. These results are robust to several sensitivity checks. Our findings extend the EMT and RBV theories' scope by establishing FA, FL, and AF as valuable resources for firms to drive their sustainability performance. Given the dearth of primary-data-based research, our empirical study addresses the gaps in the fintech, FL, and sustainability literature and yields crucial implications for theory and practice. Our research provides managers of RMG enterprises and policymakers with a constructive model for implementing fintech and managers' FL to enhance firms' access to credit and sustainability performance.

Board diversity in family firms across cultures: A contingency analysis on the effects of gender and tenure diversity on firm performance

The initial work on family firm diversity research argued that family influence negatively moderates the board diversity–financial firm performance relationship, whereas more recent empirical evidence has suggested the opposite. Drawing on upper echelons theory, we investigate national culture (i.e., the degree of masculinity in the country of the firm) as a contingency factor influencing how tenure and gender board diversity translate into superior or inferior financial performance in family and non-family firms. Our analyses of 4192 firm-year observations of publicly listed European firms support most of our hypotheses. Our results show that the positive direct financial performance effects of tenure diversity are weakened in family firms, suggesting that the larger differences in values, goals, experiences, and power among family and non-family board members may suppress the benefits of cognitive variety. Furthermore, our results support that the degree of masculinity is an important factor moderating the diversity-family firm-financial firm performance relationship for gender and tenure diversity. We thereby advance diversity research in family firms to explain under what conditions positive or negative diversity effects prevail by introducing national culture as a novel contingency factor that may help to reconcile prior conflicting findings.

ENTELEKTÜEL SERMAYE FİRMA FİNANSAL PERFORMANS İLİŞKİSİ: BIST SINAİ ENDEKSİ FİRMALARI ÜZERİNE BİR EKONOMETRİK ANALİZ

Bilgi temelli sermaye olarak ifade edilen entelektüel sermaye işletmelerin bilançolarında görünmeyen maddi olmayan varlıklardan oluşmaktadır. İnsan sermayesi, yapısal sermaye ve müşteri sermayesi olarak üç bileşenden meydana gelen entelektüel sermaye ölçülebilir hale getirilerek işletmelere rekabet avantajı sağlamıştır. Çalışmada, Borsa İstanbul Sınai endeksinde yer alan 177 firmadan, 2008-2015 yılları verisine ulaşılabilen 102 firmanın entelektüel sermaye finansal performans ilişkisi, alt sektörler bazında ve panel veri analizi yöntemi ile analiz edilmiştir. Çalışma sonucunda, entelektüel sermayenin finansal performans üzerinde genel olarak olumlu bir etkiye sahip olduğu, sektör firmalarının insan sermayesine önem verdikleri fakat yapısal sermayenin işletmelerde yeterli düzeyde olmadığı sonuçlarına ulaşılmıştır.

The Role of Stakeholder Heterogeneity in the Corporate Social Responsibility – Corporate Financial Performance Relationship

Empirical evidence on the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) remains contentious in terms of both its direction and causality. The presented study explores the intervening roles of stakeholder heterogeneity and the time dimension in the CSR–CFP relationship. We posit that there is a positive relationship between CSR activities towards market stakeholders (employees, customers, competitors) and future CFP and a negative relationship between CSR activities towards non-market stakeholders (NGOs, society, natural environment) and future CFP. A conceptual model is analysed using a sample of 115 Croatian companies. Countering expectations, a positive relationship is observed for all stakeholder groups considered (market and non-market), showing that CSR is a coherent construct regardless of the stakeholder group being studied. The key managerial implication is that socially responsible action is also in a company's economic interest.

Impact of global financial crisis on firm performance in UK: Moderating role of ESG, corporate governance and firm size

This paper investigates the impact of global financial crisis (GFC; 2007–10) on financial and non-financial performance of FTSE350 UK firms. This study tests the relationships among GFC, firm financial performance and environmental, social and governance (ESG; for non-financial performance) and estimates the moderating role of ESG, corporate governance (CG) and firm size in these relationships. Panel data from 2002 to 2018 across 351 UK firms are used. For estimation, random effect model is found suitable to investigate the relationship between financial crisis and firm performance (financial performance as well as ESG performance). The results explain that financial as well as ESG performance of the firm declined during the financial crisis period. Firm size is a moderator in the relationship of financial crisis and ESG performance of the firm. Further findings of the study explain that ESG, firm size and CG are the moderators in the relationship of GFC and firm financial performance. The results of the study are data based and can be used for policy implications. Firms can employ ESG, CG and firm size as strategy tools to enhance their performance especially during the financial crisis periods.