Financial Value Creation Research Articles

Management by keywords

Abstract We examine a corpus of integrated reports endorsed as best practice to explore how the concept of ‘capital’ and its novel extension into six types of capitals — including ‘human’, ‘social and relationship’, and ‘natural’ — are discursively constructed and legitimised in the corporate field. Our findings show that the new capitals are mentioned frequently, but in a bullet point-like way without elaboration on their significance — a response strategy that we call ‘management by keywords’. Our analysis suggests that the collective business mindset remains centred on financial value creation, with the new capitals acting as servants to financial objectives. This questions the transformative power of the six capitals, hailed as a business innovation, to move corporate practices towards more social and environmental sustainability via enhanced corporate accountability. At the conceptual and methodological level, the study showcases the potential of corpus linguistics for fostering interdisciplinary research involving linguists and scholars in business and accounting.

The impact of climate transition risk on firms’ value – evidence from select Indian-listed companies

PurposeTransitioning to a low-carbon economy requires a positive response by society, including business organizations, towards the green concept and also requires the implementation of long-term green strategies. These requirements could impose various transition risks on the sustainable development of the firms; hence, the present study aims to examine the impact of climate transition risk on a firm’s financial performance and market value creation from the Indian perspective.Design/methodology/approachWe have considered the firm-level environmental risk score (ERS) to evaluate the sensitivity of a firm’s profitability (measured by ROA & ROE) and market value (measured by Tobin’s Q) towards the climate transition risk. The present study used multiple regression analysis to examine the impact of climate transition risk on the firm’s financial performance and market value creation, as evidenced by Nifty 50 companies.FindingsThe empirical results suggested that corporate climate transition risks have been positively associated with the firm’s financial performance indicators but negatively impacted the firm’s market value creation in the case of select Indian-listed firms. Hence, our results indicate that with the increase of firm-level climate transition risk, the firm’s financial performance increases but negatively affects the firm’s market value creation. The robustness tests have also confirmed the same results and supported our analysis.Originality/valueThe present paper contributes to the existing literature on climate risks and firms’ performance by providing insights about firms’ sensitivity towards climate transition risk from the Indian perspective.

A Case Study of Financial Integration of Yonghui Supermarket under the Financial Sharing Model

At present, due to the rapid development of information technology, problems such as low financial work efficiency, high operating costs, imperfect internal control system and inadequate risk control have emerged. In order to improve and solve these problems, many companies have put forward a financial sharing solution, which in essence is to centralize financial data and carry out standard assembly-line reform on part of financial work. However, this only improves the efficiency of financial accounting to a certain extent, but does not improve the financial value creation ability, and cannot meet the deep-level requirements of enterprises. Therefore, with the gradual development of management accounting theory, the integration of industry and finance will gradually become the trend of financial management in the future. In this paper, financial sharing is the starting point to study financial integration. Yonghui Supermarket is selected as the research object. Firstly, the general situation of the company and the establishment process of its financial sharing center are introduced. Secondly, it analyzes the effect of financial integration under the corporate financial sharing model. Finally, the research conclusions of this paper are put forward.

Data-Driven Sustainable Investment Strategies: Integrating ESG, Financial Data Science, and Time Series Analysis for Alpha Generation

In today’s investment landscape, the integration of environmental, social, and governance (ESG) factors with data-driven strategies is pivotal. This study delves into this fusion, employing sophisticated statistical techniques and Python programming to unveil insights often overlooked by traditional approaches. By analyzing extensive datasets, including S&P500 financial indicators from 2012 to 2021 and 2021 ESG metrics, investors can enhance portfolio performance. Emphasizing ESG integration for sustainable investing, the study underscores the potential for alpha generation. Time series analysis further elucidates market dynamics, empowering investors to align with both financial objectives and ethical values. Notably, the research uncovers a positive correlation between ESG risk and total risk, suggesting that companies with lower ESG risk tend to outperform those with higher ESG risk. Moreover, employing a long–short ESG risk strategy yields abnormal returns of approximately 4.37%. This integration of ESG factors not only mitigates risks associated with environmental, social, and governance issues but also capitalizes on opportunities for sustainable growth, fostering responsible investing practices and ensuring long-term financial returns, resilience, and value creation.

Communication about rebranding: the case of Polish listed companies

RESEARCH OBJECTIVE: Rebranding is a crucial driver of modern marketing strategies that can only be successful if appropriately communicated to society. This research aims to explain which rebranding-related information companies disclose in their communication on this process using various information dissemination channels.
 THE RESEARCH PROBLEM AND METHODS: To examine the content of 200 disclosures about rebranding, we used topic modelling, which identifies latent patterns of word co-occurrence using computer algorithms and the distribution of words in the analyzed corpus (set of documents). We applied an unsupervised Bayesian machine-learning approach for topic modelling called latent Dirichlet allocation (LDA), a cutting-edge method that is still not widely used by scholars.
 THE PROCESS OF ARGUMENTATION: Rebranding pays out over the lifetime of a company, but society has to be appropriately informed of this decision. The information should be comprehensive, disclosed through multiple channels, and addressed to all stakeholders. However, the question is whether this theoretical knowledge finds its application in companies’ practice. We researched each rebranding case of all Polish companies listed on the WSE since 1991 and analyzed how they communicated their rebranding through diverse types information disclosure.
 RESEARCH RESULTS: Polish companies are very selective, both in the content of information disclosed and the communication channels they use. They tend to avoid explaining the reasons for rebranding that are vital for society. Information is mainly disclosed through company websites or press releases and primarily has an informal character. They ignore official stock exchange communication channels, even though rebranding information could greatly influence financial performance and value creation.
 CONCLUSIONS, INNOVATIONS AND RECOMMENDATIONS: Our findings implicate a need to increase listed companies’ awareness concerning the importance of communicating marketing strategy and its potential benefits in the creation of investor relations.

Unraveling the Relationship between Business Strategy and Shareholder Value Maximization

Purpose: This study aims to explore the relationship between business strategy and shareholder value maximization, focusing on the mechanisms that drive value creation and sustainability in the global marketplace. It seeks to integrate various theoretical perspectives and empirical evidence to enhance understanding in this area. Research Design and Methodology: The thematic analysis and narrative synthesis reveal key themes and theories that contribute to understanding the formulation of business strategy and its impact on shareholder wealth. The findings emphasize strategic consistency, resource endowments, and stakeholder engagement as crucial drivers of financial performance and value creation. Findings and Discussion: The study highlights the need for further research to adapt to emerging trends and practical challenges in strategic management and corporate governance. It contributes to ongoing discussions in the field, providing valuable insights for scholars, practitioners, and organizational leaders, and underscores the practical implications of effectively implementing business strategies for maximizing shareholder value. Implications: The study underscores the importance of continuous adaptation and innovation in accounting practices to navigate evolving business environments successfully. Moreover, technological advancements, globalization, and regulatory reforms significantly impact accounting practices and organizational dynamics, presenting both opportunities and challenges.

Quo vadis? The future of interdisciplinary accounting research

Neoliberalism rests on a fatalistic rhetoric about more perfect markets, individualistic calculus, and technologies for domination as crucial for the creation of financial value. This neglects any alternative ways of keeping people together, other than through markets, where the erosion of social cohesion is viewed as a natural effect of development. This neoliberal project has been holding accounting studies in a stranglehold, and there is a need for studies on how accounting can create social cohesion and make plural economies possible. This study’s exploration contributes to the theory of relational accounting practices by building a deeper understanding of accounting’s social function and the plurality of economies. Taking Graeber’s revision of Mauss as its starting point, it elaborates on how social relations are created through accounting practices that give rise to different reciprocities that involve morals together with autonomy and democracy, and it also examines when accounting may dissolve such social cohesion. Based on an illustrative case of pre-industrial farmers’ relational accounting practices in 18th- and 19th-century Sweden—consisting of notched wooden sticks used for balancing contributions and rights in the village—the study explains how accounting as a means of balanced reciprocity is important for social cohesion, having peacemaking functions, being important for democratic governance, teaching morality, and creating a sense of fairness. It emphasizes the relevance of Graeber’s revision of Mauss for a deeper understanding of relational accounting practices in certain contexts and as a way to combat the fatalism of neoliberalism.

The Impact of Credit Ratings on Financial Performance (ROA) and Value Creation (Tobin’s Q)

The Impact of Credit Ratings on Financial Performance (ROA) and Value Creation (Tobin’s Q)

Customer Fintech Readiness (CFR): Assessing customer readiness for fintech in Bangladesh

Financial technology (fintech) has disrupted the traditional financial system by decoupling, decentralizing, and demystifying finance. Effective and scalable adoption of fintech, however, is key to financial inclusion and value creation through new business models. While theoretical frameworks and models in the literature investigate technology adoption in general, a measurement scheme for customer readiness specifically for fintech is absent. We conduct a National Citizen Survey in Bangladesh (N = 1282), review extant literature on fintech adoption factors and variables, distill major themes into seven dimensions. In this paper, we propose the Customer Fintech Readiness (CFR) index to assess readiness to adopt and use customer facing fintech product, platforms and services. We validate the index and establish its easy replicability, albeit with small contingent adjustments. We find that customers in Bangladesh lag behind in readiness for fintech. Our dimension specific scores provide important insights for policy intervention and planning. While our dataset remains gender-imbalanced and depends on customer self-reporting, we delineate ways to fine-tune its construction for better replication of CFR in other countries.

Solutions for the commercialization challenges of Horizon Europe and earth observation consortia: co-creation, innovation, decision-making, tech-transfer, and sustainability actions

European Community (EC) Horizon-funded projects and Earth Observation-based Consortia aim to create sustainable value for Space, Land, and Oceans. They typically focus on addressing Sustainable Development Goals (SDGs). Many of these projects (e.g. Commercialization and Innovation Actions) have an ambitious challenge to ensure that partners share core competencies to simultaneously achieve technological and commercial success and sustainability after the end of the EC funds. To achieve this ambitious challenge, Horizon projects must have a proper governance model and a systematized process that can manage the existing paradoxical tensions involving numerous European partners and their respective agendas and stakeholders. This article presents the VCW-Value Creation Wheel (Lages in J Bus Res 69: 4849–4855, 2016), as a framework that has its roots back in 1995 and has been used since 2015 in the context of numerous Space Business, Earth Observation, and European Community (EC) projects, to address complex problems and paradoxical tensions. In this article, we discuss six of these paradoxical tensions that large Horizon Consortia face in commercialization, namely when managing innovation ecosystems, co-creating, taking digitalization, decision-making, tech-transfer, and sustainability actions. We discuss and evaluate how alliance partners could find the optimal balance between (1) cooperation, competition, and coopetition perspectives; (2) financial, environmental, and social value creation; (3) tech-push and market-pull orientations; (4) global and local market solutions; (5) functionality driven and human-centered design (UX/UI); (6) centralized and decentralized online store approaches. We discuss these challenges within the case of the EC H2020 NextLand project answering the call for greening the economy in line with the Sustainable Development Goals (SDGs). We analyze NextLand Online Store, and its Business and Innovation Ecosystem while considering the input of its different stakeholders, such as NextLand’s commercial team, service providers, users, advisors, EC referees, and internal and external stakeholders. Preliminary insights from a twin project in the field of Blue Economy (EC H2020 NextOcean), are also used to support our arguments. Partners, referees, and EC officers should address the tensions mentioned in this article during the referee and approval processes in the pre-grant and post-grant agreement stages. Moreover, we propose using the Value Creation Wheel (VCW) method and the VCW meta-framework as a systematized process that allows us to co-create and manage the innovation ecosystem while engaging all the stakeholders and presenting solutions to address these tensions. The article concludes with theoretical implications and limitations, managerial and public policy implications, and lessons for Horizon Europe, earth observation, remote sensing, and space business projects.

Mapping Social-Ecological-Oriented Dried Fish Value Chain: Evidence from Coastal Communities of Odisha and West Bengal in India

The production and trade of dried fish are important sources of livelihood and employment for poor people engaged in the dried fish value chain. More importantly, half of them are women. Dried fish makes a significant contribution to the food and nutrition security of the poor because it is high in calcium and other vital micronutrients. Despite its importance, work on the dried fish value chain (DFVC) continues to focus on financial value creation and linear interactions among market actors that impede the recognition of human rights, justice, food security, and power across the entire value chain. Such a neoclassical perspective on DFVC tends to undermine the complex human-nature interactions that are contingent upon specific histories, people, places, and practices. Poor fishers and dried fish processors placed at the extractive end of the value chain hold low power in the market and remain vulnerable to changing social-ecological system dynamics. The recent work on a hybrid framework of social-ecological system-oriented dried fish value chain (SESDFVC) makes a departure from the conventional dried fish value chain framework. It values dynamic resource contexts, considers upstream actors as active collaborators, and expands the notion of value to include the social-ecological wellbeing of the value chain actors. This paper, with a mixed method research framework, provides an empirical outlook of the dried fish value chain in relation to SES attributes in the context of the eastern Indian coast of the Bay of Bengal, including Odisha and West Bengal, India.

ANALYSIS OF FINANCIAL PERFORMANCE USING ECONOMIC VALUE ADDED (EVA), MARKET VALUE ADDED (MVA), AND FINANCIAL VALUE ADDED (FVA) METHODS IN PT. MAYORA INDAH, TBK PERIOD 2019 – 2021

Financial performance reflects the company's ability to manage its financial soundness level during a certain period. The purpose of this study is to determine the measurement of the financial performance of PT Mayora Indah Tbk for the 2019 – 2021 period using the Economic Value Added (EVA), Market Value Added (MVA), and Financial Value Added (FVA) methods. Data collection techniques used, namely the study of literature and study of documentation. The type of data used is secondary data sourced from the Indonesia Stock Exchange website and the company's official website. The results of the study show that the financial performance of PT Mayora Indah Tbk for the 2019 – 2021 period using the EVA method has a positive value (EVA > 0), which means that the company's management has succeeded in creating economic added value for the company. Then the MVA method also has a positive value (MVA > 0), which means the company is able to increase the value of the capital invested by the funder. As well as the FVA method, it also has a positive value (MVA > 0), which means that the company has succeeded in providing financial added value. The creation of more financial value when the company's net profit is able to cover the equivalent depreciation (ED).

Financial literacy, value creation and firm performance: an investigation of Italian small and medium enterprises

Financial literacy, value creation and firm performance: an investigation of Italian small and medium enterprises

Financial leverage and value creation by textile manufacturing smes in the city of Bogotá

Given that the initial purpose of any company is to grow and last, external financing is considered, by definition, as a means to achieve short and long-term objectives. However, the input of these resources is often used to cover deficit situations, which does not always improve their results or lead to the objectives that have been established. In this sense, the article presents an analysis of the financial leverage of five textile manufacturing companies and their relationship with a group of risk indicators. Furthermore, this relationship was characterized by a group of financial and operational drivers. Said analysis was carried out with a quantitative approach based on the financial statements of these companies, which were the raw material to prepare the aforementioned study. The research process concluded that leverage, contrary to what was expected in the selected sample, was more related to negative results than to capital growth, an aspect that is corroborated with the characterization by means of financial and operational inductors.

Do women on boards enhance firm performance? Evidence from top Indian companies

This paper examines whether gender diversity (GD) on corporate boards influences financial performance (FP) of Indian firms using System Generalized Methods of Moments (GMM) methods by considering panel data of 364 firms during 2017 to 2021, comprising of 1820 firm-year observations. The study reveals that the mere presence of a woman director (WD) on boards makes no difference in financial performance. Presence of WDs as a significant portion of the boards and their active roles in the functioning and governance of companies positively contribute to firms’ financial performances and economic value creation. Regarding other governance parameters, the study shows that larger boards do not necessarily improve firm performance. Also, independent directors do not necessarily add value to corporate performance and value creation. While a higher promoter's stake is an important factor for Indian companies to drive corporate performance, firms with separate CEO and chairperson outperform firms with CEO duality. The study also reveals that the covid 19 pandemic has negatively influenced the financial performance and economic profit generation of the Indian firms. This study is important for several reasons. First, this study considers the period (2017–2021) when Indian companies adopted new financial reporting practices (IND-AS) in line with International Financial Reporting System (IFRS), the mandatory quota system of women directors’ appointment is implemented and new corporate governance norms are implemented. Hence, our study contributes to the literature by proving meaningful insights on the role of gender diversity and other corporate governance parameters on financial performance of Indian firms in the light of newly adopted accounting and financial reporting practices. Second, few previous India based studies have mostly used pooled OLS or fixed effect models, and did not address the endogeneity problem in different forms like Dynamic Endogeneity, Simultaneity, and Unobserved Heterogeneity. This paper addresses the endogeneity problem appropriately by using the system generalized method of moments (GMM) while modelling the relation between WDs and firms’ FP. Therefore, the findings of this study are more reliable and unbiased and can be useful for effective policy making on gender diversity and corporate governance issues. Third, few prior studies which have looked into the role of WDs on FP of Indian firms, have mostly used return on assets (ROA), return on equity (ROE) and Tobin’s Q as performance parameters. Here, in addition to ROA, ROE and Tobin’s Q, we also use economic value added (EVA) as indicators of corporate performance to understand the role of WDs on economic value creation for companies. The EVA is considered as modern technique to measure the economic profit earned by a firm, and it has gained huge popularity among companies as an improved technique for measuring financial performance for companies. To the best of our knowledge, the role of WDs on economic value creation by firms has not been investigated before particularly in the Indian context. This is another unique contribution of this study. Fourth, the Covid 19 pandemic had impacted global economy severely and India was no exception. Financial performances of most Indian firms were negatively impacted due to the nationwide lockdown and uncertainties about production, revenue and earnings. This study considers both the pre and post Covid 19 pandemic period in examining our central research question using a year dummy. Therefore, our study also captures whether the covid 19 pandemic has actually impacted the financial performance of Indian firms, while modelling this relation. This is another valuable and unique contribution of this study to the literature. The findings of this study provide an understanding of how board gender diversity and other governance parameters influence financial performance of Indian firms in an emerging market context. The outcomes are also explained and aligned with the relevant policy implications in the light of recent Indian corporate governance norms and policies. These findings are useful to the companies and policymakers, as they can use these findings while designing effective boards, which can be useful in improving firm performance. Board of directors, investors, regulators, and policymakers can effectively use these findings to understand how gender diverse boards and other corporate governance parameters influence firms’ financial performance under the concentrated ownership pattern.

Value Creation in Equivocal CSR Environments: A Configuration Approach

Firms are increasingly expected by their stakeholders to tackle the “wicked problems” of society. These new pressures have created a highly equivocal corporate social responsibility (CSR) environment whereby firms face competing stakeholder perspectives regarding their expected level of financial and social value creation. To reduce CSR environmental equivocality and determine a CSR strategy, organizations need to effectively and efficiently identify, evaluate, and exploit CSR initiatives to create mutually beneficial outcomes (i.e., financial and social value). In this paper, we explain how organizations can optimize their financial and social value creation and promote the construction of intersubjective agreement, which can resolve CSR environmental equivocality. A framework is proposed that explains how the proper alignment of an organization’s level of CSR environmental equivocality, which is comprised of varying amounts of “unknowingness”, entrepreneurial strategy, which encourages and facilitates experimentation, and stakeholder engagement process, which encourages and facilitates information gathering, supports the construction of intersubjective agreement. We offer a typology of organizational value creation in equivocal CSR environments with four “ideal types” of organizations—Container, Explorer, Embracer and Manager—and posit how organizations might move from one ideal type to another.

Market, Social, or Both? Measuring Social Innovation Through Trademarks

Social innovation in market-oriented social enterprises (SEs) contributes to both social and financial value creation. In order to develop and evaluate policy programs that promote social innovation to address societal challenges, it is therefore critical to understand how to identify social innovation. However, while the literature on commercial innovation is well advanced, research lacks empirical evidence on the measurement of social innovation. This study addresses this gap by investigating how trademarks and its diverse intellectual property right (IPR) characteristics serve to measure social innovation by SEs. Based on a sample of 925 SEs from Germany, we apply a textual analysis of their corporate websites to assess four dimensions of social innovation (i.e., innovation, social impact, financial, and scalability). In total, we analyze more than 35,000 subpages of SE-websites to construct our dependent variables. Our results show that the number of SEs’ registered trademarks relate to all dimensions of social innovation. In addition, we find that certain trademark characteristics predict the dimensions of social innovation in different ways. We provide implications for both policy-makers and social entrepreneurs.

Co-creating sustainable competitiveness in an unpredictable business reality

Abstract Businesses nowadays must perform in an overcrowded market. Globalisation and access to technologies have made the competition fierce and the differentiation complicated. New challenges related to sustainability have emerged as a result of an increased environmental awareness from consumers. Their demand is shifting, and companies must adapt to the competitive pressures, social demands and legal regulations towards sustainability. However, implementing sustainable initiatives might be costly and do not ensure enhanced financial outcomes. Co-creation was found in the literature to offer potential solutions to sustainability challenges by enabling businesses to benefit from knowledge from external resources, involving consumers in their activities and seeking their engagement and approval. But the current research lacks a sustainable applicability. Hence, this theoretical study reviewed the current literature to offer an updated state of the art regarding sustainable co-creation between businesses and consumers. It aims to provide answers to how this joint collaboration can support sustainable development for companies, what type of value it generates for both parties, and what factors make market competitiveness possible despite an absence of financial value creation. We were able to create a theoretical framework including the following factors: 1) Value sharing, which considers engaging consumers’ proactive behaviours to overcome inertia and engage in a process of sustainable self-improvement; 2) Relationship management, where common interests will be merged, and consumers empowered to investigate how sustainable development can be implemented in an objective of positive long-term co-evolution; 3) Knowledge sharing, where mutual learning and understanding will lead to a synergy of power and allows to elaborate a marketable and sustainable value proposition; and 4) Innovation, which is the outcome of an efficient co-creation, where internal and external capabilities are recombined to overcome barriers related to sustainable development. The study concluded that a combination of those factors results in competitive value creation.

Financial Value Creation by Micro Designer Fashion Enterprises by Using Brand Identity as a Strategic Resource, An Exploratory Study in The Indian Market

An exploratory study in the growing fashion-design industry in India, the study focuses on Micro enterprises. The research examines brand identity as a potential strategic resource for these enterprises and how it can maximise financial value creation. The relationship between brand identity and financial value creation is a highly topical subject and is entirely unexplored in the context of Indian Micro designer fashion enterprises. Results show that the brand identity of a Micro designer fashion enterprise becomes a strategic resource for the firm by becoming its core competence, unique selling proposition, and source of differentiation and competitive advantage in the market. The Brand Identity interacts with the target customer segment to create brand equity, leading to increased customer retention, sales, and premium market positioning. All this contributes to increased profitability and creates financial value for the firm. Keywords: brand identity, brand orientation, India fashion designer, Resource-based View, financial value DOI: 10.7176/EJBM/14-12-05 Publication date: June 30 th 2022

Creating social and environmental value through integrated thinking: International evidence

AbstractIntegrated thinking (IT) is a managerial mindset increasingly discussed in the context of value creation. Through the lens of systems theory, this study examines how the degree to which IT is embedded in a firm's strategy and day‐to‐day business processes is associated with the firm's social and environmental value creation. Using a broad international dataset, we find strong evidence that our measure of IT is positively related to a firm's sustainability performance (SP), which we use to operationalize social and environmental value creation (or erosion). Our results also reveal that the increase in a firm's SP might come at the cost of a short‐term decrease in financial performance (FP). We find no indication, however, that IT induces a trade‐off between SP and long‐term FP. Integrated thinking appears to stipulate long‐term financial value creation instead. We further explore moderating factors within the organizational and institutional context of our sample firms and highlight implications for society, corporate practice, and policymaking.