Measures Of Firm Performance Research Articles

Exploring the relationship between strategic attention breadth and performance: The role of corporate social responsibility

Abstract The attention-based view contends that executives possess limited attentional capabilities that must be carefully allocated across different strategic issues. Although many scholars contend that narrow strategic attention breadth leads to better performance, others argue that broad strategic attention breadth may be more beneficial due to better opportunity scanning. We posit that the relationship between strategic attention breadth and performance will be inverted U-shaped, where strategic attention breadth is positively related to firm performance up to an optimal point, after which firms will see declining benefits due to executive cognitive overload. Furthermore, we propose that executives’ assessment of strategic opportunities will be influenced by the firm’s corporate social responsibility perspective, as the firm’s environmental and ethical commitment may mitigate executive blind spots and enhance opportunity selection. We support our hypotheses with multiple measures of firm performance and a content analysis of annual reports corresponding to a 5-year longitudinal sample of 2,245 S&P 500 firms.

Employer cooperation, productivity and wages: new evidence from inter‐firm formal network agreements

AbstractUsing uniquely rich administrative matched employer–employee data for Italy from 2008 to 2018, we investigate the impact of firms' formal network agreements (FNAs) on firm performance and employee wages. We find an overall significant and economically relevant positive effect of FNAs on various measures of firm performance, but there are no tangible benefits for the workers, and wages decrease slightly, on average. There is, however, marked heterogeneity in the impact on both firms and workers. Estimated rent‐sharing equations, as well as other tests that exploit unionization data, suggest that the negative effects on wages can be explained by a decrease in workers' bargaining power following the introduction of FNAs.

Fostering strategic synergy: Empirical insights on aligning innovation activities with competitive strategies

An effective innovation strategy is crucial for firm performance and national economic growth, yet many firms still face the challenge of misalignment between their innovation activities and strategies. While previous studies focused on the mediation role of innovation activities on strategy and performance, research is needed to examine the complex interdependencies between strategies and innovation activities to better understand their impact on firm performance.From a configurational perspective, this study investigates how different combinations of innovation activities and strategies influence firm performance. Twenty combinative effects of four categories of innovation activities and five strategic types on two firm performance measures (growth and profit) were explored, resulting in the creation of an innovation-strategy alignment map. This study contributes to innovation strategy literature by providing the alignment map, where four configurational clusters with equifinality were identified. It also contributes to competitive strategy literature by offering empirical verification for the “pure” versus “hybrid” debate and identifying two new types of hybrids with more and different strategic dimensions by using an empirical method, thus advancing the call for more detailed hybrid strategy research in this area. In addition, the innovation-strategy alignment map provides options to managers with different resources and capacities for effective planning.

Audit Committee and Tobin’s Q as a Measure of Firm Performance Among Nepalese Commercial Banks

The study examines the impact of audit committee on the performance of Nepalese commercial banks. Tobin’s Q and return on assets are selected as the dependent variables. The selected independent variables are audit committee size, audit committee meeting, audit committee meeting allowance, gender diversity, board size and leverage. The study is based on secondary data of 16 commercial banks with 111 observations for the study period from 2015/16 to 2021/22. The data were collected from Banking and Financial Statistics published by Nepal Rastra Bank, reports published by Ministry of Finance and annual report of respective banks. The correlation coefficients and regression models are estimated to test the significance and importance of audit committee size, audit committee meeting, audit committee meeting allowance, gender diversity, board size and leverage on the performance of Nepalese commercial banks. The study showed that board size has a positive impact on Tobin’s Q and return on assets. It implies that increase in board size leads to increase in Tobin’s Q and return on assets in Nepalese commercial banks. Further, gender diversity in the audit committee has a negative impact on Tobin’s Q and return on assets. This indicates that higher the number of females in the audit committee, lower would be the Tobin’s Q and return on assets. Similarly, the study showed that audit committee size has a negative impact on Tobin’s Q which indicates that increase in audit committee size leads to decrease in Tobin’s Q. Whereas, audit committee size has a positive impact on return on assets. It means that increase in audit committee size leads to increase in return on assets. Moreover, leverage has a positive impact on Tobin’s Q. It shows that higher the level of leverage ratio in the banks, higher would be the Tobin’s Q. However, leverage has a negative impact on return on assets indicating higher the level of leverage ratio in the banks, lower would be the return on assets.

Intangible assets and firm performance: The relative effects of recognized and unrecognized assets

The term intangible assets embraces a wide array of assets, resources and capabilities that contribute to the productive potential of firms, but which do not have physical substance. Most empirical studies simply use an aggregate measure of intangibles derived from data collated from firms’ financial statements (we refer here to recognized or written intangibles). But such a measure includes only some of the valuable intangibles that firms possess, and typically does not capture the value of many intangibles (e.g. managerial and organizational capabilities, market knowledge, trusted relationships) that are internally generated by the company. Yet it is likely that such unrecognized or non-written intangibles will have at least as important an impact on corporate performance as that of the written intangibles. We show empirically that the growth of both categories of intangible assets have significant effects on sales growth (our chosen measure of firm performance), and that the elasticity of firm performance with respect to the growth of written intangibles is significantly larger than the elasticity with respect to the growth of non-written intangibles. However, our analysis also reveals that the mean stock of non-written intangibles is three times larger than the stock of written intangibles, and that the mean growth of the non-written intangibles is three times faster than that of written intangibles.

Intellectual capital and firm performance of Jordanian financial institutions

This study aims to explore the financial implications of intellectual capital in the Jordanian financial sector during the period 2009–2018. It uses Pulic’s (2004) value-added intellectual capital model, particularly capital employed efficiency, structural capital efficiency, and human capital efficiency, and tests its potential effect on firm financial performance measures, including return on assets, return on equity, asset utilization ratio, and Tobin’s Q. The study’s findings demonstrate that value-added intellectual capital positively influences the financial performance of Jordanian financial companies. Value-added intellectual capital is not found to have a significant impact on productivity, but it is strongly and positively related to firm profitability and market value. As for the main components of value-added intellectual capital, human capital efficiency has a significantly positive impact on a company’s performance, but regarding structural capital efficiency, the outcomes vary depending on the measure of firm performance. Notably, when firms are categorized into sub-industries (banks, insurance companies, and financial service companies), it is found that the profitability of insurance companies is more affected by intellectual capital than that of banks or financial services. The results also show that investors place great importance on the efficiency of intellectual capital, particularly within the banking industry. Furthermore, implementing Shariah compliance standards boosts the positive effect of structural capital efficiency on corporate market value and reinforces the positive influence of human capital efficiency on productivity.

Corporate governance and firm performance: Evidence from political instability, political ideology, and corporate governance reforms in Pakistan

AbstractWe examine impact of corporate governance on firm performance following the implementation of the changes to the Code of Corporate Governance of Pakistan in 2012. Our sample period from 2008 to 2022 include periods of political instability and shifts in Pakistan's political landscape, providing an opportunity to examine the effectiveness of corporate governance mechanisms in enhancing accounting‐ and market‐based firm performance measures. We find significant improvements attributed to reforms in the regulatory framework surrounding corporate governance practices particularly from expanded scope and composition of boards and audit committees. This led to broader capabilities and effective controls, thus improving firm performance and investor confidence more so during periods of political instability and changes in political ideology.

The dark side of competition in developing economies: Evidence from closely held SMEs

AbstractThis paper investigates how product market competition affects the performance of closely held small and medium enterprises (SMEs) in developing economies. In contrast to prior findings that focus on large publicly traded companies in developed economies, we find that market competition has a negative effect on firm performance. Our findings are robust to different measures of competition and firm performance and survive after addressing endogeneity issues. We provide evidence that the adverse effect of competition is channeled through increased corruption. Our findings further suggest that firms respond to competition by attempting to acquire more financial resources and government support, adopt quality improvement and cost reduction policies. The adverse effect of competition is especially strong for smaller firms.

Board Structure and Financial Performance of Manufacturing Companies in Nigeria

This study examines the impact of board structure on corporate financial performance in Nigeria. It investigates the Diversity of boards of directors in Nigerian firms and analyses whether board structure has an impact on financial performance, as measured by return on equity (ROE) and return on capital employed (ROCE). Based on the extensive literature, four board characteristics (board Diversity, board size, board ownership and CEO duality) have been identified as possibly having an impact on corporate financial performance and these characteristics are set as the independent variables. The Ordinary Least Squares (OLS) regression was used to estimate the relationship between corporate performance measures and the independent variables. Findings from the study show that there is strong positive association between board size and corporate financial performance. Evidence also exists that there is a positive association between outside directors sitting on the board and corporate financial performance. However, a negative association was observed between directors’ stockholding and firm financial performance measures. In addition, the study reveals a negative association between ROE and CEO duality, while a strong positive association was observed between ROCE and CEO duality. The study suggests that large board size should be encouraged and the Diversity of outside directors as members of the board should be sustained and improved upon to enhance corporate financial performance.

Impact of Corporate Capital Structure on Corporate Performance: An Empirical Study of Emerging Market Using GMM Estimation Technique

This study aims to check the impact of capital structure on nonfinancial firm's performance, which are listed on the Pakistan Stock Exchange. This study used panel data from 06 years of 289 nonfinancial firms from 2017 to 2022 to achieve the goal. This study used two-step Generalized Methods of Moments (GMM), a dynamic analysis model. Five measures are used for firm performance, while two are used for capital structure. This study proved that a mixed result, such as TDR, has a significant and inverse relation with four measures of firm performance, such as ROA, GPM, NPM, and SP, while statistically, there is no relation with ROE. LTDR is only significant with NPM at a 5% level and has an inverse impact on NPM. This study is significant because it examines, in a single investigation, the effects of leverage on various performance metrics. This study is particularly well-weighed because it has many ramifications for potential stakeholders. The study's practical implications will benefit top-level management in strategic management, the government in enacting laws and other regulations, and investors in making investment decisions based on various environmental and factor considerations. A lower leverage ratio, for instance, is a sign of improved performance because managers will strategically plan to keep it low. On the other hand, lower leverage ratios are also advantageous to stockholders because they allow them to invest in companies with lower debt-to-equity ratios and increase their wealth.

Capturing key interdependences among supply chain disruptions and mitigation strategies to enhance firm performance

PurposeThis paper aims to capture the complex interdependences between supply chain disruptions (SCDs), SC risk mitigation strategies and firm performance in the context of disruptive events to enhance resilience for medium-sized and large firms coping with complex supply chain networks. The roles of digitalization, insurance and government support have also been addressed as potential strategies to counteract the impacts of disruptions on supply chains.Design/methodology/approachThis study is based on an empirical investigation in an FMCG company – using a hybrid causal mapping technique based on the frameworks of interpretive structural modeling (ISM) and Bayesian networks (BN) – of 11 levels of relationships between SCDs (in supply, production, logistics, demand and finance), SC risk mitigation strategies (flexibility, efficiency, agility and responsiveness), insurance, government support, information and knowledge sharing, digitalization and finally the key firm performance measures (continuity, quality and financial performance).FindingsThe results of the empirical investigation reveal and describe: (1) the nature and probabilistic quantification of the lower-level relationships among the four SCDs, among the mitigation strategies and the three firm performance measures; (2) the nature and probabilistic quantification of the higher-level relationships among the impacts of SCDs, SC risk mitigation strategies and firm performance and (3) how to model and quantify the complex interdependences in single firms and their supply chains.Originality/valueOur results can support managers in developing more effective decision-making models to assess and manage unfavorable events and cascade effects among different functions and processes in the context of risks and disruptions.

Frugal Innovation Strategies and Supply Chain Performance of Food and Beverage Firms in South-South Nigeria

This study explored frugal innovation strategies and supply chain performance of food and beverage firms in South-South Nigeria. It critically analyzed the dimensions of frugal innovation strategies (value innovation, cost cutting advancement and technological innovation) and relate them to supply chain performance measures (product availability, on-time delivery and supply chain flexibility) of food and beverage firms. The study applied the positivist research philosophy and correlational research design. The population of this study comprised 82 registered food and beverage firms in South-South Nigeria. The sample size consisted of 68 food and beverage firms in South-South Nigeria. The Taro Yamene’s formula was used to determine the sample size for the study. The sampling unit consisted of managers of the selected food and beverage firms in South-South Nigeria. A structured questionnaire was used for data collection in this study. The data collected were analyzed statistically while the Pearson Product Moment Correlation Coefficient (PPMCC) was used to test the formulated hypotheses. The SPSS software program version 24 was used to correlate the data collected on the study variables. The findings revealed that value innovation has a significant relationship with product availability, on-time delivery and supply chain flexibility of food and beverage firms. This study also revealed that cost cutting advancement has significant relationship with product availability, on-time delivery and supply chain flexibility of food and beverage firms. The study equally revealed that technological innovation has a significant relationship with product availability, on-time delivery and supply chain flexibility of food and beverage firms. Based on these findings, it was concluded that frugal innovation strategies such as value innovation, cost cutting advancement and technological innovation are significant predictors of supply chain performance of food and beverage firms in South-South Nigeria. Based on the findings and conclusion, it was recommended that food and beverage firms in South-South Nigeria should adopt frugal innovation strategies as it would improve their supply chain performance.

Does Female on Board Affect M&A Participating Firms’ Performance? Empirical Evidence from India Using Dynamic Panel Data Analysis

The aim of this research is to examine the impact of gender diversity and female leadership position on the firm performance of Indian listed firms participating in mergers and acquisitions (M&A) activities. Available research has focused on a small sample of firms and considered ‘gender diversity’ as the only variable. Bearing this in mind, this study focusses on the leadership positions females hold on corporate board along with gender diversity affecting the firm performance measures for the sample of M&A participating firms, as M&As lead to major restructuring of the board. The ‘gender diversity’ is measured with the number of females present on corporate board as directors, ‘leadership position’ is measured with females holding the position either as Chief Executive Officer (CEO) or Chairperson on the board. The study employs panel data set for Indian non-financial National Stock Exchange listed M&A participating firms for the period 2013–2020. Using a system of GMM dynamic panel estimates, the study analyses the relationship between gender diversity and females’ varied leadership position on the firm performance measures, that is, return on asset, Tobin’s q. The findings reveal that there is a positive association between gender diversity and firm performance measures. Females holding the top leadership positions as either CEO or Chairperson on the board positively impact the firm performance measures. This study adds to the existing literature on gender diversity at the board level and M&A literature in the Indian context. JEL Codes: G 3, G 34, J 16

Intellectual capital and firm value: The role of firm performance

Businesses worldwide are getting new opportunities and facing challenges due to increased market competition and the transformation of globalization dynamics. To become successful and to get a competitive edge, it has become imperative for companies to adopt modern business strategies. This study empirically examines the nexus between intellectual capital and firm value with the mediating role of firm performance. VAIC (value-added intellectual capital) has been taken as an independent variable along with its three components, i.e., VACA, VAHU, and STVA. ROA and ROE have been taken as a measure of firm performance. Firm value was measured through Tobin’s Q. The panel data was collected from non-financial firms listed on the Pakistan stock exchange for six years resulting in 474 observations. Fixed-effect regression test was conducted with the help of Eviews 9.0. The findings revealed that intellectual capital positively impacts the firm value. Moreover, firm performance mediates the nexus between intellectual capital and firm value. This study has contributed not only to literature related to intellectual capital, firm performance, and firm value but is also helpful for practitioners and managers as it provides insight into the specific components of intellectual capital, which generates firm value if invested and maintained efficiently and effectively.

Equity ownership concentration and firm growth: the moderating role of industry growth

PurposeThe effects of ownership concentration on firm performance usually considers two conflicting perspectives: monitoring and expropriation hypotheses. Past studies have produced mix findings. This study aims to shed light on this relationship by focusing on a specific measure of firm performance, firm growth. The moderating effect of industry growth in the aforementioned relationship is also considered, which advances knowledge on the role of moderators.Design/methodology/approachThis study resorts to data from a sample of 21,476 Portuguese firms, which is examined using hierarchical linear modelling. This approach is adequate because the data has a hierarchical structure: the firms are nested within industries.FindingsThe results show that equity ownership concentration has a positive effect on firms’ growth and that industry growth amplifies this relationship. Ownership concentration can spur effective monitoring, thereby alleviating principal–agent conflicts of interest and speeding up decision-making, enabling timely competitive actions that promote growth.Research limitations/implicationsThe research conceives ownership structure in two groups. However, equity ownership concentration often acquires more complex shapes. In addition, the data used is from a single country.Practical implicationsThe results show that firms pursuing growing strategies and operating in growing industries benefit from equity concentration.Originality/valueDifferent from past studies, this study focuses on firm growth performance and considers the moderating effect of industry growth.

THE IMPACT OF CAPITAL STRUCTURES ON FIRM PERFORMANCE: EMPIRICAL EVIDENCE FROM BIST BASIC METAL INDEX

Numerous different components should be evaluated together and separately, and processes should be managed in this way, to enhance the financial performance of companies, to produce more accurate future projections, and to assist decision-making processes. The main objective of the research in this condition is to ascertain the effects of the capital structure variables (financial leverage, long-term Liabilities/ total assets, short-term Liabilities /total assets, and equity/total assets) on firm performance measures (return on assets, return on equity, and Tobin's q). In this manner, panel data analysis was employed to construct predictions employing data from 17 companies that maintained data continuity over the allotted time. The primary driving forces behind this sector's research are its leading position in Türkiye’s production activities, its profound influence on other industries, and its strategic significance for the nation's economy. Huber, Eicker and White resistive estimator was employed to provide more consistent findings after basic assumption tests were applied to assess the validity of the models described in the research. The findings demonstrate that the Equity/Total Assets Ratio demonstrates statistically significant values in each of the three models. Other factors' effects on performance metrics were found to be insignificant. As a consequence, it has been suggested that market participants might include this information set in their decision-making even if it is noted that there is a link between the performance criteria of the companies and their capital structure preferences.

Assessing the effect of core and expanded ESG on corporate financial performance: COVID-19’s moderating role

PurposeThis study aims to investigate the influence of disclosing environmental, social and governance (ESG) factors on financial performance, taking into account the moderating effect of the COVID-19 pandemic.Design/methodology/approachA sample of the top 100 non-financial firms listed on the Bombay Stock Exchange, for the years 2019–2022, has been considered. Suitable panel regression models have been used to assess the impact of non-financial disclosure on accounting and market measures of firm performance. In addition, a panel data moderating effect model is used to assess the moderating impact.FindingsThe outcomes of the study partially favour the value-creation role of ESG disclosure. Specifically, the disclosure of already established ESG metrics, particularly social and governance aspects, positively impacts the market performance while environmental transparency negatively impacts the accounting performance. Of the three ESG components, only extended governance disclosure adds to market value. Results of the moderation effect reveal a significant impact of the pandemic on the ESG disclosure–financial performance relation. However, a more pronounced effect before the pandemic is observed. The results are robust to endogeneity.Originality/valueThis study sheds light on the financial consequences of ESG disclosure within the context of an emerging nation. This is done by using a novel holistic ESG reporting framework to obtain more accurate results. Furthermore, the study distinguishes itself by examining the long-term moderating influence of the unexpected COVID-19 crisis on the ESG disclosure–financial performance relation.

Does ESG disclosure really influence the firm performance? Evidence from India

In this paper, we examine the influence of ESG disclosure scores on firm performance of companies listed in the National Stock Exchange (NSE). The study uses 167 sample firms from 2010 to 2020. We capitalise overall ESG disclosure scores taken as a proxy to measure the effect of sustainability disclosure on firm performance. Further, we consider the return on assets (ROA), return on equity (ROE), Tobin’s Q, and Price Earnings ratio (P/E ratio) as firm performance measures. We employ dynamic panel data regression analysis to examine the influence of ESG disclosures on performance of the firm. In order, to address the endogeneity issues, we apply Generalised Method of Moments (GMM) model. The study results show a positive relationship between ESG disclosure and firm performance. It suggests that companies’ desire to enhance their performance need to pay more attention towards sustainability disclosures.

CEO turnover after product‐harm crises

AbstractProduct‐harm crises are discrete events in which product failures expose consumers to safety hazards. Firms facing such crises must legally recall their products to protect consumers from further harm. In this study, we examine the effects of product‐harm crises and their recall strategies on CEO turnover. We find that firms are more likely to replace their CEOs after issuing product recalls, especially for recalls that are proactive and that offer extensive corrective actions. We further find that firms with poor performance and with limited financial flexibility are more likely to dismiss their CEOs after product recalls. Our study contributes to the disciplines of accounting, finance, and management by documenting product‐harm crises are a strong predictor of CEO dismissal, that is, incremental to other measures of firm performance for U.S. companies.

Sustainable investment conditions and firm performance in the Middle East and North Africa: a holistic approach

ABSTRACT We analyze the effect of sustainable investment conditions on firm performance in the Middle East and North African countries. We measure sustainable investment conditions by the extent of market preparedness for sustainable investment and the percent of total assets under management qualifying for sustainable investment with and without Shariah-compliance characteristics. We use both accounting and market-based performance measures to capture alternative influences due to sustainable investment conditions. We control for firm-specific characteristics and country-level sustainability-related, economic, and institutional factors. We find that higher market preparedness is positively associated with all performance measures, whilst sustainable investment volumes are negatively associated with accounting measures of firm performance but positively associated with market performance. The effects remain broadly robust to various sensitivity tests and endogeneity analyses. Country-level institutions moderate the sustainability conditions effect. Our dominance analysis identifies the factors that are key in improving firm performance, providing clear directions for effective policy intervention.