Firm Financial Performance Research Articles

A Micro-Level Evidence of how Investor and Manager Herding Behavior Influence the Firm Financial Performance

Using the investor-herding index (IHRB) and manager-herding index (MHRB), the emergence of investors’ and managers’ herding behavior at the corporate-level and its potential impact on firm financial performance (FFP) is analyzed in the entire study. The study utilizes the micro-level data of 296 listed firms of Pakistan stock exchange (PSX) from 2013 to 2017. Empirical findings show that the investors’ and managers’ herding significantly affect FFP. The results are robust under alternative measurements of FFP. This study has a unique contribution to the literature on behavioral finance by addressing the astonishingly overlooked phenomena of firm-level biases and their potential impact on FFP. For prospective investor’s decision, the findings are significant in such way that the market index is irrelevant than the firm-level financial evidence. Explicitly, the study concludes that positive herding behavior is elucidated by the bullish trend and inverse herding behavior of investors with respective to firm value leads toward bearish trend of stock market index. The likelihood of market crash may become more stringent in circumstances once managers and investors interactively exhibit negative herding behavior. Thus, the study offers useful policy and strategy implications for the associated stakeholders to the device the policies accordingly. JEL Code: D9, D21, D91, G11.

Effect of Tax Rate Cut on Financial Performance of Electronic Firms

This study assesses the effect of tax rate cut on the financial performance of Taiwanese-listed firms using data from 2009 to 2012. This study hypothesizes that income tax rate cuts affect financial performance using selected financial ratios as indicators. This study finds that the hypotheses on the Debt-Equity Ratio, Return on Equity, and Return on Invested Capital are supported. However, there is no support for the hypothesis on the Current Ratio, Price-Earnings Ratio, Equity Ratio, and Operating Profit Margin. Using a pooled sample, the capital structure tends to adjust resulting in lower debt and, accordingly, higher equity. In particular, the electronic group reacts differently with a significant and negative relationship between debt-equity ratio and tax, moreover, it finds lower production and wages relevant.

Capital Structure and Financial Performance of Non-Financial Firms Listed at Nairobi Securities Exchange, Kenya

Background: Globally, the choice of an optimal capital structure has posed a great challenge to most firms. In Kenya, some firms have achieved optimum levels while others are still faced with serious capital structure issues. Theoretically, there is a general inclination that capital structure employed automatically affects financial performance. It is against this background, that the purpose of the study was to establish the effect of capital structure on financial performance of non-financial firms listed at the Nairobi Securities Exchange in Kenya. Specifically, the study sought to establish the effect of capital structure on financial performance. Theoretical literature postulates conflicting relationship between capital structure and financial performance which has underscored the usefulness of panel dataset in the study. Materials and Methods: This study employed both cross sectional and longitudinal research designs, organized as panel data. The sample population of the study consisted of thirty-three (33) non-financial listed firms. This study only used data from the 2009 to 2018 annual financial reports. The study adopted purposive sampling procedure in the determination of the sample size and secondary data from annual financial reports of the firms, African Listed Companies, Nairobi Securities Exchange publications and Capital market Authority handbooks were used. STATA statistical tool was employed in the analysis of the data. Descriptive statistics were used to analyse the main characteristics of the variables. The hypotheses were tested using regression analysis and correlation analysis. Results: The findings of the study revealed that the effect of Debt Ratio (DR) and Debt-Equity Ratio (DER) on firms’ financial performance (ROA) was statistically significant. Further, the results of Equity Ratio showed that the effect of equity finance on financial performance was not statistically significant. Conclusions: The study not only contributed to understanding the link between capital structure and financial performance in Kenya, but at the same time confirms the findings of previous studies which revealed significant and insignificant links between capital structure and financial performance.

Carbon and financial performance nexus of the heavily polluting companies in the context of resource management during COVID-19 period

The depletion of fossil fuels and the new EU climate policy goals to achieve a zero-emission economy after 2050 encourage highly polluting companies to increase the efficiency of energy conversion from non-renewable energy sources, develop renewable energy sources and implement resource management systems in production. Studying the relationship between environmental performance and financial performance of firms is particularly important in times of the Covid-19 pandemic, as companies' decisions to limit or continue green investments and low-emission transformation may impact access to external financing sources. The aim of this study is to identify the shape of the relationship between the carbon and financial results of heavily polluting enterprises in the context of resource management and to assess the impact of the Covid-19 pandemic on the considered relationship. For a panel sample of Polish enterprises representing highly polluting industries with manufacturing plants covered by the EU ETS in 2009–2021, a third-degree polynomial describing this relationship was estimated. A U-shaped relationship was identified between carbon emission intensity and return on sales and return on assets, which can be explained by the ‘too-little-of-a-good-thing’ effect. Increase in share of renewable energy in the production structure significantly reduces firms’ profitability, which can be explained by the relatively high costs associated with the development of renewable energy and the changing legal regulations regarding this type of investment. It has been shown that companies with high carbon emission intensity achieved lower sales profits and return on assets compared to companies with lower carbon intensity during the Covid-19 pandemic. The lower scale of allocation of free emission allowances compared to previous years, combined with the increase in emission allowance prices under the influence of shocks generated by the pandemic, had a negative impact on the profitability of heavily polluting companies. The modelling results provide important information to managers who, based on them, can make more informed decisions regarding the use of natural resources in production and the involvement of enterprises in investments aimed at the use of cleaner production technologies and the development of renewable energy.

The Influence of Corporate Social Responsibility on the Financial Performance of Firms in Ghana: The Moderating Role of Board Independence and Diversity

The Influence of Corporate Social Responsibility on the Financial Performance of Firms in Ghana: The Moderating Role of Board Independence and Diversity

Análisis de la estructura del capital e intensidad de capital. El caso de las empresas colombianas

Standard financial theories assume that investment and financing decisions are intertwined. Investment decisions involve selecting assets that generate positive cash flows and maximize shareholder value, while financing decisions involve identifying the optimal mix of debt and equity financing to fund these investments. The main objective of this paper is to analyze the interdependence of assets and liabilities in a sample of Colombian manufacturing firms with varying degrees of roundaboutness (capital-intensive nature). This study employs canonical correlation analysis to determine the interaction between balance sheet components. Subsequently, a threshold regression model is employed to evaluate the influence of financial indicators on the financial performance of firms with heterogeneous capital intensity. The findings reveal that low-capital intensity firms match the maturity structure of assets and liabilities. In firms with low roundaboutness there is a significant relation between throughput, working capital turnover and the proportion of capital expenditure to operating cash flow with ROIC. However, this relationship becomes non-significant at high levels of indebtedness. Conversely, capital-intensive firms exhibit a mismatch between asset and liability maturities, relying on shareholders’ funds to finance longterm assets and inventories. In this group of companies, throughput is positively associated with ROIC regardless of the level of debt, whereas the relationship between working capital turnover and ROIC is not significant until a certain debt threshold is exceeded. The impact of the capital expenditure to operating cash flow ratio on ROIC varies depending on debt levels. Companies with high roundaboutness that exceeds a debt threshold experience a negative impact.

Women ownership as a form of leadership: The role of context in understanding its effects on financial performance

Researchers have acknowledged that women leadership plays an important role in the success of organizations. However, the effects of women leadership on the financial performance of firms are mixed results. This article focuses on women ownership (i.e., critical mass and ownership percentage) as a form of leadership and family ownership as two boundary conditions that help us understand when small and medium enterprises (SMEs) benefit from women leadership. We argue that for women leadership to impact the financial performance of SMEs, women need to have a critical mass to influence outcomes and have power through ownership to influence decisions. We also argue that the effects of these relationships are affected by the context of ownership. These ideas are tested with a sample of 10,696 private SMEs from the country of Colombia. Results indicate that the women leadership enhances SME financial performance through both critical mass and a larger percentage of women ownership. However, family ownership negatively moderates the relationship between percentage of women ownership and SME financial performance. Implications of these results are discussed. JEL CLASSIFICATION: D22; L25

A Meta-Analysis on the Relationship Between Innovation Capability & Knowledge Sharing and Role of Innovation Capability on Financial Performance of Firms

A Meta-Analysis on the Relationship Between Innovation Capability & Knowledge Sharing and Role of Innovation Capability on Financial Performance of Firms

Assessing the Effects of CEO Characteristics on the Financial Performance of Firms in Nigeria

This study investigated the relationship between CEO characteristics and the financial performance of listed firms in Nigeria (2005 –2022). The regression analyses employed in this study are pooled panel regression, random panel regression and fixed panel regression. Under the firm performance indicator – ROA, the Hausman-statistics p-value of 0.23 indicated that we accept the null hypothesis which says that random effect prevails. But the fixed effect result was adopted because it best explains the model as it considers the constant variables and solves the omitted variable bias problem. The result showed that CEO origin has a positive and significant impact on return on assets (2%). Whereas, CEO gender showed a negative and insignificant effect on return on assets (30%). CEO tenure impacts a negative and insignificant relationship with return on assets (62%). Furthermore, this result showed a positive and insignificant relationship between leverage and return on assets. While capital expenditure shows a negative and insignificant relationship with return on assets. The study recommends that, Firms should adopt internal recruitment in appointing CEO, as they tend to possess insider-knowledge and experience peculiar to the firm’s nature of work and relationship with the staff that an outsourced CEO may not have opportunity to immediately after his appoint and could be a major set-back in fulfilling the goal of the firm.

The Interaction of Maqasid Al-Shariah in the Relationship Between ESG and Firm Financial Performance

The Interaction of Maqasid Al-Shariah in the Relationship Between ESG and Firm Financial Performance

Impact of employee stock ownership on firm financial performance: does corporate social responsibility matter

Impact of employee stock ownership on firm financial performance: does corporate social responsibility matter

Impact of employee stock ownership on firm financial performance: does corporate social responsibility matter

Impact of employee stock ownership on firm financial performance: does corporate social responsibility matter

The Impact of Capital Structure on Firm Financial Performance in Oil and Gas Sector in Sultanate of Oman

This study examines the relationship between capital structure and financial performance within the oil and gas sector in the Sultanate of Oman, focusing on companies listed on the Ministry of Energy and Minerals over the period of 2021-2023. The research investigates how different capital structure components, such as debt-to-equity ratio, leverage, and debt maturity, influence various financial performance indicators, including profitability, liquidity, and shareholder value. The study aims at offering insights into the best capital structure strategies for oil and gas firms in Oman to improve their financial performance and sustainable growth using quantitative analysis methodologies, such as regression analysis and financial ratio analysis. It is anticipated that the research’s conclusions will add to the body of knowledge already available on capital structure and financial performance, with important ramifications for investors, financial managers, legislators, and other industry participants in Oman’s oil and gas sector and beyond.

Impact of Leverage on Firm Financial Performance: Evidence from Pakistan

Impact of Leverage on Firm Financial Performance: Evidence from Pakistan

Firm Financial Performance: do Environment, Social, and Governance Drive Predominance

Firm Financial Performance: do Environment, Social, and Governance Drive Predominance

Does Corporate Social Responsibility Affect Organizational Financial Performance in Nigeria?

The financial performance of multinational firms is usually affected by the business environment in which they operate. This environment brings challenges especially socio-culturally related factors. This study aims at examining the effect of corporate social responsibilities on organizational financial performance in Nigeria. The study adopts ex post facto research design and purposive sampling methods. 30 quoted firms actively trading between 2018 and 2022 are selected and data were collected from their financial statements. Panel least square was used as method of data analysis. The t-test was used as test of hypotheses and was measured against a standard z-score value of 1.96. The results of the study show that corporate social responsibility positively affect organizational financial performance in Nigeria. The study therefore recommends that multinational organizations should make efforts to create a close relationship with its immediate environment by investing in its environment and use strong corporate governance policy to strengthen continuity.

Adoption of Digital Technologies, Business Model Innovation, and Financial and Sustainability Performance in Start-Up Firms

Adoption of Digital Technologies, Business Model Innovation, and Financial and Sustainability Performance in Start-Up Firms

The pitfalls of corporate social irresponsibility: Hypocrisy of family firms in South Korea

Corporate hypocrisy poses a significant risk to businesses striving for sustainable management. Stakeholders' increasing interest in ESG (environmental, social, and governance) activities and easy access to information makes maintaining authenticity essential. Any firm caught in hypocrisy risks losing stakeholder trust and damaging its legitimacy. Family firms willing to preserve socioemotional wealth are more susceptible to hypocrisy than general firms due to the family’s significant influence on decision-making, including CEO (chief executive officer) turnover and legitimacy crises. This study examined the impact of CSIR (corporate social irresponsibility) on sustainability in two South Korean companies and assessed how internal factors (e.g., CEO turnover and succession) and external factors (e.g., market competition and environmental dynamism) influenced them. To this end, we employed a case study as the central methodology and conducted text mining, interviews, and financial analysis through content analysis. Our first finding is that CSIR negatively affects financial and non-financial performance in family firms. Second, family firms must make genuine efforts to restore their legitimacy. As per the moderation effect of CEO succession, the pivotal consideration is appointing an external CEO rather than whether the subsequent CEO is a family member. Beta chose an external CEO who was a family member, while Alpha selected a long-time company insider who was not a family member as the succeeding CEO. Alpha, which designated an internal nonfamily CEO after the CEO succession, demonstrated a financial performance resilience inferior to Beta. Third, firms must communicate promptly with stakeholders in external conditions. With internationalization and digitalization, stakeholders enjoy a greater array of choices, and the evolution of public media has heightened the prominence of CSIR. The diminishing reliance of stakeholders on a particular company, the active articulation of opinions, and enhanced knowledge magnify the impact of a company’s CSIR on the sustainability of family firms.

The moderating role of ownership structure between ethical business conduct, compliance and legal, transparency and disclosure, board of directors on financial performance

This study examines how corporate governance dimensions relate to financial performance in Jordanian firms and whether ownership structure moderates these relationships. Quantitative analysis was conducted using secondary data on 69 companies listed on the Amman Stock Exchange from 2017-2022. Multivariate regression tested effects of board, transparency, ethics, and compliance indices on performance measured by Tobin's Q, ROA, and ROE. Moderated regression analyzed the contingency role of ownership concentration. Board size, independence, transparency, ethical conduct and legal compliance had significant positive impacts on valuations and profitability, supporting agency and stakeholder perspectives. Ownership concentration strengthened board monitoring but dampened transparency effects. The findings highlight the importance of governance practices like board oversight, disclosure and ethics for improving Jordanian firms' performance. Ownership contingencies suggest adapting governance mechanisms to concentrated structures. This study provides rare empirical evidence on the under-researched Jordanian context. Examining interactive effects of ownership brings new insights regarding concentrated emerging markets.

Transfer Pricing and Organizational Performance of Multinational Corporations in Nigeria: A Mediating Effect of Audit Quality

Aim: The relationship between the enforcement of transfer transaction prices and organisational success is getting more complex. Hence, the primary aim of this study is to examine the effects of transfer pricing on the financial performance of Nigerian-listed multinational companies (MNCs), while also considering the potential moderating effect of audit quality. Methodology: The research design used for this study was ex post facto. The study used a sample of 10 Multinational Corporations that were listed on the Nigeria stock market as of December 2023. The research used panel regression analysis to investigate the influence of transfer price on the overall performance of multinational companies (MNCs), with a particular focus on the mediating effect of audit quality. Findings: The research found that, when taking into account the effect of audit quality, the exchange rate has a positive influence on the financial performance of multinational firms, as measured by return on assets (ROA). Furthermore, the analysis of the impact of audit quality on effective tax rates demonstrates a statistically significant negative relationship with the financial success of multinational corporations, as assessed by return on assets (ROA). Conclusion: The performance of multinational corporations in Nigeria is highly influenced by transfer pricing, especially when considering factors such as exchange rate and effective tax rate, which are regulated by audit quality. Recommendation: It is recommended that multinational corporations undertake appropriate measures to enhance their effective tax rate in order to enhance performance and mitigate expensive errors via the implementation of high-quality audits in the context of transaction transfer pricing rules.