Measures Of Firm Performance Research Articles

Capital Structure and Firm Performance of Technology Sector in Malaysia

The purpose of this study is to investigate the relationship between capital structure and firm performance of technology sector in Malaysia. The 27 public listed software companies in Bursa Malaysia are examined within the time period of 8 years from 2012 to 2019, with the total observation of 216. The data is focusing in one sub-sector of technology sector which is software sector. The study is conducted with two firm performance measures which are return on asset (ROA) and return on equity (ROE). Total debts to total assets (TDTA), long-term debt to total assets (LTDTA), and short-term debt to total assets (STDTA) are the proxies of capital structure while growth (GRO) is the control variable. Panel data regression model is used in this study and found that that long-term debt to total assets (LTDTA) and short-term debt to total assets (STDTA) have a negative significant relationship with return on equity (ROE) while total debt to total assets (TDTA) has a positive significant effect on return on equity (ROE). However, in return on assets (ROA), only short-term debt to total assets (STDTA) has a negative significant on it, while the other independent variables are insignificant. Lastly, there is a positive significant relationship between growth (GRO) and performance of a company.

Determints of CEO Bonus Compensation

Abstract The primary purpose of this study is to explore the determinants of CEO bonus compensation: to examine CEO bonuses and to explore whether or not the independent variables are associated with CEO bonus compensation. For the purposes of this study, a sample of 2,448 CEO bonus compensations across 1,622 firms from 1997 to 2002 was used to test several hypotheses. The dependent variable in this model is the CEO bonus compensation. Bonus is the dollar value of the bonus (cash and non-cash) earned by the named executive officer during the fiscal year. Corporate diversification was divided into two categories; international diversification and industry diversification. Firm performance is measured by both Market-based, Performance (RET) and Accounting-based, Performance (ACE). The results show that the higher the degree of international diversification, and the higher accounting earnings performance, the more CEOs receive in bonuses. In addition, this study found that international diversification is associated with a greater use of bonuses and with a greater reliance on accounting-based, rather than market-based measures of firm performance. The results also demonstrated that CEOs in firms with more investment opportunities will receive higher bonuses than CEOs in firms with fewer investment opportunities and CEOs in larger firms will receive higher bonuses than CEOs in smaller firms.

Diversity Matters: A Study on the Relationship between Board Career Diversity and Firm Performance

Are shareholders better off hiring directors with in-depth specialties in the company’s core business or hiring directors with broader perspectives? This study addresses the question by investigating the relationship between directors’ career diversity and firm performance. It employs Tobin’s Q, total shareholder return, and return on equity as measures of firm performance. Accordingly, board career diversity has a significant and positive effect on firm performance. Moreover, we find that board directors with diverse industry experiences create value for firms via advisory (e.g., R&D and capital expenditures) and monitoring (e.g., equity compensation) roles. Given that diversity in career matters, corporations can seriously consider board composition and promote career diversity among board members.

The Impact of Firm Characteristics on Firm Performance During the Covid-19 Pandemic: Evidence from Saudi Arabia

This study aims to examine the impact of firm characteristics on the operational, financial, and market performance of Saudi listed firms during the COVID-19 pandemic. This study applies a number of regression models over the period from Q3 2019 to Q3 2020, thereby enabling the examination of key drivers in the pre- and post-crisis periods. We find that the operational, financial, and market performance measures all saw a significant drop with the onset of the COVID-19 pandemic. The models show that larger firms displayed better performance both before and after the pandemic, though there is some evidence of a weakening of this relation for return on equity (ROE) with the onset of the pandemic. Leverage is a clear negative driver of firm performance across the three measures both before and after the onset of the pandemic, though there is evidence that the effect strengthens after the crisis. Neither sales revenue scale nor firm liquidity exerts a significant impact on firm performance measures. Certain industry types, such as materials (petrochemicals), consumer services, real estate, and consumer durables & apparel appear most affected by the pandemic. Surprisingly, the regression models do not show a significant impact on the scale of the performance measures with the onset of the pandemic. The results of this study have wide implications for decision-makers, illustrating the imperative for regulatory bodies, governments and central banks to combine forces to reduce the financial and economic impacts of the pandemic both now and in the future.

Corporate governance and firm performance: empirical evidence from Jordan

PurposeThis study aims to assess the effect of director board and audit committee attributes and ownership structure on firm performance. In general, resource dependency and agency theories have underlined the superior performance of firms equipped with stronger Corporate Governance (CG) versus those of deficient governance. Concurrently, the study delineated the provisions of ownership structure provision, specifically foreign ownership and institutional ownerships, thus describing the component denoting the structural significance in explicating firm performance.Design/methodology/approachThe current study implemented an empirical approach involving the construction of extensive CG measures thus, subjected to 81 non-financial firms listed on the Amman Stock Exchange spanning the period of 2014–2018.FindingsThe current study identified the positive and significant relationship between the board of directors and audit committee characteristics with the firm performance measures tested, namely, return on equity (ROE) and Tobin’s Q. In terms of ownership structure, both foreign and institutional ownerships yielded a significant and positive relationship with ROE. Meanwhile, Tobin’s Q led to an insignificant and negative relationship between both ownership types and firm performance measures.Practical implicationsThe analytical outcomes substantiate the possibility of enhanced performance shown by growing global firms because of the implementation of CG mechanisms, specifically because of the practices resulting in minimised agency costs.Originality/valueThe current study offers novel evidence detailing the impact of CG effectiveness towards performance and its implementation in emerging markets following the minimal amount of scholarly efforts on the topic. It is a timely contribution towards the current understanding of the relationship linking governance and performance for the purpose of ensuring the adoption and imposition of a strong corporate governance code by the government.

Revisiting the Multinationality -- Firm Performance Relationship: The role of home-country culture

We test the contested multinationality-performance (M-P) relationship on a truly global sample of 335 multinational enterprises (MNEs) from 31 countries representing three regions of the world: Anglo-Saxon, Europe, Asian and emerging markets We use two measures of multinationality: foreign sales dispersion by five regions and the ratio of foreign sales to total sales (FSTS) and two measures of firm performance.(return on sales and return of assets). We also introduce the never before used GLOBE cultural practices: performance-based cultures (PBC) and socially supportive cultures (SSC) as independent variables in M-P studies. Result indicate strong support the S-curve relationship controlling for cultural practices using both the foreign sales dispersion and foreign sales/total sales (FSTS) measures of multinationality for both measures of firm performance. Peak performance for MNEs from Asia and emerging markets is lower than those from the Anglo-Saxon and European regions. PBC and SSC were both negatively related to firm performance.

Do firm-level sustainability targets drive environmental innovation? Insights from BRICS Economies

This paper examines the relationship between sustainability targets and their impacts on corporate environmental innovation. Using data over the period 2009-2018 on 202 companies from BRICS countries, covering firm-level governance, social responsibility and sustainability this paper examines firm-level sustainability targets, and incentives encourage managers to engage in more environmentally friendly activities. Using panel data probit regression, and after controlling for country-level governance and institutional factors, the study finds that embedding environmental targets in corporate strategy does encourage corporate managers to design and develop eco-friendly products and services, and such firm-level commitments at the top motivates managers to promote, market, and label environmentally friendly products. The findings call for greater emphasis on aligning executive compensation with sustainability targets rather than focusing too much on short-term accounting and market-based measures of firm performance.

Accrual Accounting and Resource Allocation: A General Equilibrium Analysis

ABSTRACTThis paper evaluates the role of accrual accounting in improving firms' production decisions and resource allocation across firms. I introduce two imperfect firm‐performance measures, cash flows and accounting earnings, into a general equilibrium model with heterogeneous firms under imperfect information. The model demonstrates that improvements in measurement systems lead to more informed decisions on the part of firms and ultimately to allocation of greater resources to high‐productivity firms via the product and input markets. Estimated parameter values are consistent with accrual accounting improving managers' information about current productivity by providing a better measure of historical firm performance. Quantitative analysis suggests that introducing accrual‐accounting information on top of cash‐accounting information leads to a 0.5% increase in aggregate U.S. productivity and a 0.7% increase in aggregate U.S. output via improved resource allocation. The corresponding estimates for China and India, as benchmarks for developing countries, are larger: a 1.5% to 2.3% increase in aggregate productivity and a 2.3% to 3.4% increase in aggregate output. I conclude that accrual accounting plays a significant role in determining aggregate productivity via improved resource allocation.

Independent board, gender diversity and bank performance in Nigeria: a system-GMM approach

PurposeThis study aims to examine the effects of board independence and gender diversity on bank performance in Nigeria.Design/methodology/approachThe two-step system-generalized method moment was used to estimate the effect of board independence and gender diversity on bank performance in Nigeria using annual data of 15 deposit money banks from 2006 to 2018.FindingsThe results revealed that gender diversity is a significant positive predictor of bank performance, whereas board independence is a negative predictor of bank performance in Nigeria.Practical implicationsDespite the significant positive relationship between gender diversity and bank performance, this paper does not recommend mandatory quota-based initiates of female representation on corporate boards because of the increasing number of female representations on corporate boards of banks in Nigeria.Originality/valueThe study contributes to corporate governance literature from developing country perspective and policy, particularly, on the relevance or otherwise of market-based measures in assessing bank performance in developing counties. This paper finds that market-based variables are not good measures of firm performance in economies with underdeveloped markets.

Trends and relationship among intellectual capital disclosures, patent statistics and firm performance in Indian manufacturing sector

PurposeThis study highlights the trends of qualitative intellectual capital disclosures and patent statistics in the Indian manufacturing context by considering the numerous patent applications, patent grants, forward citations and backward citations. Furthermore, the study investigates the relation among qualitative disclosures, patent statistics and firm performance.Design/methodology/approachAll manufacturing companies of CNX 500 Index of National Stock Exchange of India Limited are considered. Based on data availability, 243 manufacturing firms spanning across seven major manufacturing sectors are included. Secondary data were obtained from the annual report of companies and patent databases from 2004 to 2005 to 2013–2014, generating a sample of 2,430 firm years. Content analysis and citation analysis are used for collecting the relevant data.FindingsOverall, the study results indicated increasing trends for all types of intellectual capital disclosures. Similar trends are observed for patent applications and patent grants, indicating a surge in patenting activities across the manufacturing sector. However, increasing trends in patenting activities are not reflected for forward and backward citations. In addition, significant differences in means and trend coefficients for qualitative disclosures and patent statistics indicated industry specificity within the Indian manufacturing sector. Furthermore, industry specificity is observed when translating intellectual capital to firm performance. The measure of firm performance, that is, Tobin's Q, is having a significant positive association with qualitative disclosures and patent statistics.Research limitations/implicationsAs the study is based on secondary data, its accuracy is limited by the accuracy of the data sources such as the annual reports of companies and patent databases.Practical implicationsThe study findings imply that policymakers should devise and execute sector-specific policy interventions. Moreover, managers and policymakers should emphasize the qualitative aspect of patenting activities.Originality/valueThe study is an original work that highlights the trends in qualitative disclosures in the Indian manufacturing context. The value relevance of intellectual capital and patent statistics has been established.

“A conceptual four-stage maturity model of a firm's green manufacturing technology alternatives and performance measures”

PurposeThis paper develops a contingency based model to understand how green technologies and green manufacturing performance measures evolve with the green manufacturing maturity levels of the firms.Design/methodology/approachA conceptual research model is developed by synthesizing extant literature. An illustrative case study of a paint manufacturing company is conducted, analyzing its five key green initiatives, which it has undertaken to demonstrate the research model. The primary means of data collection was interviews and document analysis.FindingsIt was observed that for all the five green initiatives, the choice of green technologies and the use of green manufacturing performance measures corroborate with the proposed research model. Further, the initial green manufacturing effort was motivated to comply with regulations, which subsequently shifted to gain strategic advantage, such as cost reduction and visibility.Research limitations/implicationsThe proposed model was applied only to an Indian paint manufacturing company with their five key green initiatives, which potentially limits the generalizability of the findings to other industries and/or geographies.Practical implicationsThe findings would aid practitioners in understanding both selection of green technology and the use of green manufacturing performance measures, based on a firm's maturity stage.Originality/valueThis study conducts a much-needed research on the evolution of green technology alternatives and green manufacturing performance measures for firms according to the four-stage maturity model derived from the natural resourced-based view.

Ownership Characteristics,Corporate Social Responsibility, Resource Productivity And Firm Performance: An Empirical Study

Corporate governance continues to be at the forefront as evinced by some of the recent incidents at organisations such as Tata Sons, Yes Bank and ICICI bank. Traditionally, ownership characteristics have been considered as close substitutes representing corporate governance, considering that board processes and activity do not yield themselves to much scrutiny beyond a few media reports and analysis. The research article undertakes a study of ownership, corporate social responsibility(CSR) and resource productivity in the Indian context. Using a sample of 900 firms from the non-financial domain, the study uses multivariate regression to identify the effect on market based measure of firm performance. Results indicate that all the ownership variables have a positive and significant influence on market based metrics of organisations. However, the CSR orientation or intent does not indicate any impact on organisation’s market based metric. The resource productivity, on the hand is strongly positive, indicating that markets recognise, intuitively the impact of competencies and capabilities of people. For practitioners, the implications are the quest to identify further levers of strategic and competitive advantage since the governance indicators have merely explained a small part of firm performance.

Not all shadow banking is bad! Evidence from credit intermediation of non-financial Chinese firms

Using data from 2009 to 2016 data, we investigate the relation between leverage and investment in listed firms in China against the backdrop of rising shadow banking. We examine a component of Chinese shadow banking specifically related to firm financing: entrusted loans that arise through credit intermediation among non-financial listed firms. We identify credit intermediation by estimating the elasticity of liquid financial assets to financial liabilities. Our fixed-effect instrumental variable estimation shows that credit intermediation among Chinese firms positively affects firm investment efficiency. In particular, as firms lend to other affiliated firms, the enhanced lender-borrower interest alignment alleviates debt overhang problem that firms must otherwise fully endure in industries where there is no active credit intermediation. For private firms, affiliation with lending state-owned enterprises is a substitute for political connection, as both forge stronger interest alignment and reduce debt overhang. We observe a similar outcome for state-owned enterprises in industries where credit intermediation is performed by either private or state firms. Moreover, credit intermediation exerts some disciplinary effects on the investment of low-performance firms. Our findings are robust to different measures of firm performance.

Board gender diversity: performance and risk of Brazilian firms

Purpose This study aims to intend to check if female board representation affects performance and risk and to analyse the evolution of the demographic aspects of the presence of women on boards in Brazil. Design/methodology/approach The authors used a sample of 150 Brazilian publicly traded companies from 2010–2018, with different measures of firm performance, firm risk and women’s presence on the board. The study approach is based on a set of ordinary least squares, quantile and panel data regressions. Findings The presence of women on the board has a positive effect on all of our accounting and market performance measures. However, the result of the impact on risk is not conclusive. The study also found that the number of females on the board has a more significant effect at the lower levels of firm performance measured by return on equity, but at the higher levels when measured by Tobin’s Q. Regarding return on assets, the more significant effect happened on the extremes of the performance distribution. The study findings point that market investors place more value in female presence on the board than in director positions. Originality/value By estimating the impact of women’s presence on the boards of directors in firm performance and risk, this study aimed to verify this impact in different aspects of the company. In addition, the authors did so in a sample with many years, making it possible to evaluate the historical evolution of the feminine presence in the boards of administration as well as in the groups of directors, assisting Brazilian legislators with new evidence about the possible impacts of Draft Law 7179/2017.

Measuring dynamic inefficiency in the presence of corporate social responsibility and input indivisibilities

This article proposes a model for evaluating inefficiency accounting for firms’ corporate social responsibility engagement as part of their broader output production activities. The model combines the production of marketable outputs, socially responsible outputs, and undesirable outputs into overall measures of firm performance using data envelopment approaches. Methodologically, the article builds on the dynamic by-production model, which accounts for adjustment costs related with investments, allowing for non-convexities of the production set and input indivisibility, as well as firm corporate social responsibility activities. This study compares dynamic technical inefficiency scores for each input, output, and investment, estimated assuming the presence of input indivisibility (non-convexity) and its absence (convexity). The empirical application focuses on European firms in three industries (offering capital, consumption, and other goods) for the period 2010–2017. The results show significant differences between inefficiencies with and without the convexity assumption and find evidence for non-convexity of firms’ production set and inputs’ indivisibility. Overall, among all outputs, the results reveal the highest inefficiency in the production of socially responsible outputs.

Shareholder Activism Around the Globe: Hedge Funds vs. Other Professional Investors

Shareholder activism has sharply increased over the past decade and spread both across countries and among different types of investors. Today, 50% of all engagements occur outside North America, with non-hedge fund investors accounting for one-third of all engagements. We investigate the effects and drivers of hedge fund and non-hedge fund activism using an international dataset of 2,689 activist engagements across 44 countries between 2008 and 2019. Activist investments in North America, on average, yield the largest immediate positive stock market returns and buy-and-hold returns, followed by engagements in Europe and the Asia-Pacific region. In North America, short-term abnormal returns for hedge funds are at a similar level as those for non-hedge funds, but in Europe and the Asia-Pacific region, they are higher for non-hedge funds. However, globally, hedge funds achieve higher buy-and hold returns and are more successful than non-hedge funds in implementing change in target firms. Over time, our results suggest unfulfilled investor expectations, as announcement returns are increasing but (abnormal) buy-and-hold returns and the impact on performance measures of target firms are decreasing for both hedge funds and non-hedge funds.

Examining the dominance of Comprehensive Income to Net Income as a Measure of Firm Performance

Examining the dominance of Comprehensive Income to Net Income as a Measure of Firm Performance

The post‐acquisition performance of cross‐border mergers and acquisitions conducted by Chinese firms in the high‐tech industries: Profitable or innovative?

AbstractThis article examines the characteristics and performance of cross‐border mergers and acquisitions (M&As) conducted by Chinese firms in the high‐tech industries. Multiple measures of firm performance were used in exploring the profitability and innovativeness of both the acquiring and target firms. With 1,340 cross‐border M&As completed between 1990 and 2014, the major characteristics of these deals (e.g., industries of acquiring firms, countries of target firms, and the level of ownership) were identified. In terms of the performance of acquiring and target firms, the value creation hypothesis was supported by the innovation measure; however, it was not supported by accounting‐based measures. The implications of this study and directions for future research are thus discussed.

Digital servitization value co-creation framework for AI services: a research agenda for digital transformation in financial service ecosystems

PurposeInnovative firms have rapidly developed artificial intelligence (AI) capabilities into their service ecosystems, essentially changing perceptions of what is service quality and service delivery in their respective industries. Nonetheless, the issues surrounding AI services remain relatively unknown. The purpose for this paper is to offer a digital servitization framework for understanding how AI services impact value perceptions, consumer engagement and firm performance measures. The authors use the financial service ecosystem to explore this topic.Design/methodology/approachThe authors explore relevant literature on digital servitization, service-dominant logic and AI/disruptive innovation. Next, a conceptual framework, organized by AI-Service Exchange Antecedents, Context of AI Usage and Digital Servitization Consequences, is developed. The authors conceptualize consequences for consumers and firms.FindingsThe main findings suggest that the linkages between consumers, financial institutions and fintech companies with AI usage in a service ecosystem should be identified; how value is created among multiple SD Logic-AI network actors should be analyzed; and the effects of AI-consumer interactions (lower-level and higher levels of engagement) on firm performance measures should be explored.Research limitations/implicationsThe conceptual framework identifies gaps in the literature and suggests research questions for future studies.Practical implicationsThis paper may assist practitioners with the development of AI-enabled banking activities that involve direct consumer engagement.Originality/valueTo the authors’ best knowledge, this research agenda is the first comprehensive framework for understanding value co-creation in the context of AI in financial services, linking antecedents, usage and consequences.

Does Board Size Influence the Firm Performance? A Global Literature Review

The objective of this paper is to analyse the findings of past empirical studies concerning the impact of board size on fi rm performance. Forty nine empirical papers from thirty one countries published in various reputed peer reviewed and indexed journals during the period of 1995 to 2020 have been reviewed in this study. It has been found from the review of these papers that there is mix impact (positive, negative and insignifi cant) of board size on firm performance. However, positive relation between board size and value measure of firm performance (Tobin q) and negative relation between board size and profi tability measure of performance (Return on Assets) have been found in majority of the previous research work. Evidence of nonlinear relation between both of these variables has been also found, but its frequency is very less. This paper is very useful for doctoral candidates, researchers, academicians, policy makers and corporate managers.