Market-based Performance Research Articles

Are government subsidies or preferential listing policies better for the market performance of tech firms? Evidence from Korea

ABSTRACT Tech firms are growth engines in modern economies. We examine which policies, government subsidies or preferential listing, work better for tech firms’ performance. We test whether Korean tech firms outperform control firms using key market-based performance metrics. Tech firms benefiting from Korea’s preferential listing system outperform control firms in funding, patent creation, and market capitalization but underperform in IPO-day returns. In contrast, government subsidies do not affect market performance other than six-month returns from the IPO date. These findings indicate that preferential listing policies are better than government subsidies for the market performance of tech firms.

Does intellectual capital in Islamic banks outperform conventional banks? Evidence from GCC countries

PurposeThis study explores, first, the performance effect (accounting- and market-based performance) of intellectual capital (IC), measured using the value-added intellectual coefficient (VAIC) and its modified version (MVAIC), on Islamic and conventional listed banks in Gulf Cooperation Council (GCC) countries and, second, whether Islamic banks outperform conventional banks in utilising IC.Design/methodology/approachUsing resource-based view theory and literature reviews, regression analyses are conducted on data for the period 2012–2019 on 26 Islamic and 42 conventional banks. For hypothesis testing, the generalised method of moments panel data regression analysis is applied after addressing endogeneity issues.FindingsResults, after controlling for corporate governance, indicate that the performance effects of IC (VAIC and MVAIC) on both bank types largely converge and Islamic banks do not outperform conventional banks in IC use. IC has a stronger effect on accounting performance measures for conventional banks than for Islamic banks, but IC has some effect on market performance measures for Islamic banks alone. Corporate governance variables do not play a significant role in the presence of VAIC and MVAIC although there are differences in corporate governance between the two bank types.Originality/valueThis study bridges the gap in GCC banking sector literature on the association between IC efficiency and performance measures of Islamic and conventional banks, from a comparative perspective. It enhances understanding, about the IC–financial performance nexus, of policymakers, regulators, bank managers and other stakeholders interested in the influence of different business models, financing/investment methods and governance structure on the performance of both bank types.

The influence of top management team gender diversity on firm performance during stable periods and economic crises: An instrumental variable analysis

Does a greater representation of women in top management teams (TMTs) contribute to higher firm performance? Although several studies have investigated this question, they have failed to sufficiently account for endogeneity. We address the endogeneity problem by using an instrumental variable (IV) design to estimate the causal effect of women’s representation in TMTs on firm performance. We use a shift-share or Bartik-type instrument, which is well-established in economics but has received little attention in management and leadership research. We analyze the effect of TMT gender diversity on four types of firm performance: profitability, market-based performance, liquidity, and growth. Our sample is based on firms in the S&P 1,500, which we observe over 24 years (1997–2020). Our findings indicate that TMT gender diversity positively affects the profitability, liquidity, and growth of firms but does not impact market-based performance. We also analyze whether the effect of TMT gender diversity was stronger during two economic crises, namely the 2008/2009 financial crisis and the COVID-19 pandemic, but our instrumental variable analysis provides no evidence for such an interaction effect. Our results are robust to multiple alternative specifications. This study contributes to research on strategic leadership, specifically regarding the effect of women leaders, as well as the crisis leadership literature.

A Study on Market Based Performance of Selected Small Market Cap Agrochemical Companies of India

The firm's performance is influenced by the business environment, which can be measured using accounting-based or market-based measurement. That’s why here researchers have tried to study the market performance of selected small-cap agrochemical companies, and their objective is to compare and contrast market-based performance measurement of selected small-cap agrochemical companies in India. The total population of studies includes all agrochemical companies that are registered under the BSE, NSE, or both in India. Presently, there are a total of 17 agrochemical companies registered under the BSE, NSE, or both as per the capital market in India, out of which only 5 are small-cap agrochemical companies. Considered for the studies and selection criteria are companies total market capitalizations as per Capitaline Market Magazine on March 8, 2020. The nature of the study is descriptive, and the sampling method is purposive. The collected data for the period is 10 years, starting from 2011–12 to 2020–21, and is based on secondary sources that were collected from published annual reports of selected small-cap agrochemical companies. The level of significance for the hypothesis testing is set at 5%. For the purpose of data analysis, the researcher has applied a one-way ANOVA test for hypothesis testing and also applied descriptive statistics analysis tools like standard deviation, standard error, and mean by using SPSS. For measuring market performance, the researchers have used market-based ratio techniques, which include different ratios. During this research study, researchers found that the market-to book value ratio and dividend yield ratio are significantly different. Among selected small-cap agrochemical companies, looking at the other side of the Tobin Q ratio, price-earnings ratio, and annual stock return ratio found that there is no significant difference among selected small-cap agrochemical companies in India, according to my research study.

Stock market liberalization and pay for market-based performance: Evidence from a quasi-natural experiment in China

Our study examines how the liberalization of stock markets affects the contractual usefulness of market information in executive compensation, as reflected in the pay-performance sensitivity. Using a quasi-natural experiment in China, we find that stock market liberalization policy increases the pay-for-market-performance relationship but has no significant impact on pay-for-accounting-performance relationship. Further analyses indicate that the influence of market liberalization on the CEO pay-for-market-performance relationship is restricted to firms with effective governance, a strong legal enforcement environment, operating in unregulated industries, and firms without major shareholders from state agencies. Finally, we find that such effects may be a result of higher price informativeness, shorter price delays and lower price mispricing following stock market liberalization.

Ownership structure and firm performance: evidence from Saudi Arabia

Purpose This study aims to examine the impact of ownership structure variables on the performance of Saudi listed firms. Design/methodology/approach The impact of ownership structure variables on firm performance is examined using fixed effects and dynamic panel generalised method of moments regression approaches for 70 listed firms over the period 2016–2021. Ownership structure variables are captured by examining government, institutional, insider, foreign and family ownership, and firm performance is gauged in terms of the accounting-based measures of return on assets and the return on equity and the market-based measures of Tobin’s Q and the market-to-book ratio. Findings The results show that government, institutional, insider and foreign ownership all positively affect both accounting and market-based performance measures, whereas family ownership exerts a negative impact across the models. The findings support resource dependence theory, agency theory and alignment effects arguments. Practical implications The findings have significant implications for Saudi regulators in their effort to improve domestic capital market efficiency and investor protection, while also highlighting the need for a corporate governance code to safeguard minority shareholders. The results demonstrate that government, institutional, insider and foreign ownership exert an important impact on firm operational and market performance. Originality/value This study expands the literature by examining how ownership structure variables affect performance in an interesting developing country corporate context.

Board diversity on firm performance from resource-based view perspective: new evidence from Pakistan

PurposeThis study aims to investigate the impact of extensive board diversity on firm performance from the perspective of resource-based view (RBV) theory in the context of Pakistan.Design/methodology/approachThe analyses are made using a panel random-effects model and generalized method of moment (GMM) across 188 non-financial firms listed in the Pakistan Stock Exchange (PSX) over the period of 2009–2020. The robustness of findings is checked through alternative measurements of the variables and alternative estimation techniques.FindingsThe results show that board members' nationality, ethnicity and educational level diversities are significantly positively related to firm performance. In contrast, age and educational background diversities negatively affect firm performance. However, gender and tenure diversities have an insignificant relationship with firm performance.Research limitations/implicationsThis study is conducted in the context of Pakistani firms; thus, the findings may not be generalizable to other economies because different economies have different institutional settings and governance structures.Practical implicationsThe policy-makers should encourage the inclusion of board members' nationality, ethnicity and educational level diversities having relevant educational backgrounds to improve firms' competitive performance. The suggested structure of the corporate board may improve firm performance by attracting multiple stakeholders and fulfilling their expectations.Social implicationsThe appointment of a director should be based on merit rather than on political connections or personnel relationships to improve social welfare and avoid their negative impact on firm competitive performance.Originality/valueTo the best of the authors' knowledge, this is the first study that investigates the impact of board diversity on firm accounting-based performance and market-based performance in the emerging economy of Pakistan. This study uses RBV theory to provide a unique corporate governance structure based on board diversity, particularly in Pakistan.

Financing decision, ownership type and financial performance of listed non-financial companies in Ghana

The study aims to investigate the nexus between financing decision, ownership type and financial performance of listed non-financial companies in Ghana. Data were selected from 22 listed non-financial companies on the Ghana Stock Exchange from the years 2010 to 2021. A non-parametric estimation technique-robust OLS (Driscoll-Kraay) was employed to test the variables of interest. Findings indicate that long-term debt funding directly affects ROA, ROE and TQ negatively. Again, total debt funding posits a positive link with ROE and TQ. Moreover, the direct relationship between ownership type, financing decision and accounting-based performance measure (ROE) was insignificant but significant with market-based performance measure (TQ). Subsequently, the interaction role propelled ownership (foreign and state) to be significant on the relation between financing decision and financial performance. Largely, foreign-owned companies play a strong positive role on the link between financing decision and financial performance. Further, state ownership negatively affects the association between financing decision and financial performance. The study contributes to knowledge by considering the multiplier effect of ownership type on the relationship between financing decision and financial performance in Ghana. For policy implication, regulators specifically of state interest entities should formulate balanced frameworks for welfare seeking in public service delivery and performance for sustainability.

Impact of ESG Risk Scores on Firm Performance: An Empirical Analysis of NSE-100 Companies

This study aims to compare the overall environment, social and governance (ESG) risk score and environment risk score, social risk score and governance risk scores across different industrial sectors in India and explore the impact of overall ESG risk score, environmental, social and governance risk score on firm performance. The ESG risk score is collected for 2021–2022 from Yahoo Finance, and financial data were collected from Prowess IQ. The Nifty 100 index of NSE is used as a platform to shortlist firms. Tobin’s Q, return on assets (ROA) and return on equity (ROE) are used as proxy for the firm performance which determines the market-based, operating and financial performance, respectively. We found a significant difference among the ESG risk scores, ESG risk scores of different industries. There is a low correlation between ESG scores, environment scores, social scores, governance scores and Tobin’s Q, ROA and ROE. The regression results show that the ESG risk score has an insignificant negative impact on Tobin’s Q (market-based performance) and the environmental risk scores, social risk scores and governance risk scores have an insignificant positive impact on the Tobin’s Q. ESG risk score has an insignificant negative impact on ROA (operating performance) and ROE (financing performance) while the environment risk scores, social risk scores and governance risk scores have an insignificant positive effect on ROA and ROE. Thus, ESG risk score and its components do not show any significant impact on firm performance.

Sustainability, corporate governance, and firm performance: Evidence from emerging markets

The purpose of this paper is to explore and investigate the influence of sustainability especially the environmental pillar and corporate board diversity on the financial performance in emerging markets. This study examines the effect of sustainability and board composition on firm performance. The sample of this study comprises 1382 firms with a total of 19199 firm-year observations covering a period from 2008 to 2021. These firms are listed in the MSCI emerging markets index representing 24 emerging countries. The results show that the main index of sustainability (ESG index) and other sub-indices (environmental score, emission score and CO2 equivalent emission) of sustainability that are used as measures of climate change have an effect on accounting-based performance (return on assets, ROA) and market-based performance (Tobin’s Q and book-to-market value, BTMV). Also, the results show that age, nationality and education as board diversity components affect the firm performance; however, the female directors on the board did not affect the firm performance.

The Role of Ownership and Gender on Firms' Performance: Evidence from Portugal

This work aims to examine the relationship between corporate governance (CG) and corporate performance, considering the effect of the COVID-19 pandemic. We consider a sample of Portuguese-listed firms for the period between 2010 and 2020 using a panel data methodology. The main results show that higher levels of managerial ownership and gender diversity may drive higher firm performance. However, no evidence was found that a representation of three or more female directors leads to an increase in performance. Moreover, the results suggest that there is a negative relationship between leverage and performance when we consider a market-based performance measure. Finally, the study found evidence that the COVID-19 pandemic had a negative impact on corporate performance. This study sheds light on the role of ownership and gender on firms' performance. The results of this research can have some implications for academia and policymakers' decisions.

EARNINGS MANAGEMENT AND FIRM’S SUBSEQUENT PERIOD PERFORMANCE: A STUDY ON NON-FINANCIAL INDIAN LISTED FIRMS

While studies internationally have found an association between earnings management and the firm’s future performance, there is limited literature concerning Indian firms. Prior research in the Indian context has revealed the existence of opportunistic accruals management. However, its impact on a firm’s future performance remains unexplored. Thus, this study examines the impact of accrual-based earnings management on future performance among listed non-financial Indian firms. This study estimates accruals management proxies for 2006-2017 using the widely accepted modified-Jones model of discretionary accruals. Firm performance is measured using ROA, ROE, and PE ratio. This study uses a one-step System Generalised Method of Moments (GMM) to address the problem of endogeneity in the dynamic panel model. The result from the estimator indicates that discretionary accruals have a negative impact on accounting-based performance measures (ROA and ROE) and a positive impact on the market-based performance measure (PE ratio). These results are consistent for the three estimators (OLS, FE, and GMM), establishing a robust relationship between accrual management and firm performance. The findings of this study are consistent with the signaling hypothesis and suggest the likelihood of accruals reversal.

Board committees and financial performance: exploring the effects of gender diversity in the emerging economy of India

PurposeThis study aims to highlight the impact of introducing women directors to board committees, thereby empowering them to contribute to decision-making, and as a result, influence firms’ financial performance in an emerging economy.Design/methodology/approachThis study uses a fixed-effects panel data regression model to test the impact of gender diversity on corporate boards as well as board committees on firms’ financial performance. Two widely used diversity measures, the Blau index and the Shannon index, have been used to enhance the robustness of the results.FindingsThe findings suggest that gender diversity on prominent board committees (remuneration committee and nomination committee) positively affects firms’ financial performance when measured by the market-based performance measure, but it is insignificant when measured through accounting-based performance indicator. Furthermore, the benefits of gender diversity accrue to the firms only when women are part of prominent committees and are engaged in governance mechanisms, rather than just being appointed on corporate boards as a means of tokenism.Originality/valueThis study is among the first to investigate the relationship between gender diversity and financial performance through the lens of committee assignments. Moreover, the unique cultural and institutional setting offered by India, which is an emerging economy, provides a fertile ground for understanding the role of women leaders in the workforce.

Relationship among Environmental Performance, R&D Expenditure and Financial Performance: Evidence from Indian Manufacturing Firms

The study is conducted to analyse the effect of environmental performance on the financial performance of 67 Indian manufacturing listed companies, categorized into most polluting and least polluting companies for the period of 7 years i.e. from 2014–15 to 2020–21. The present study has employed environmental performance as independent variable measured by various environmental performance measures. The content analysis has been conducted to estimate the environmental performance scores. The study covers both measures of financial performance, i.e. accounting-based measures (Return on Equity) and market-based performance measures (Market to Book value ratio) as dependent variables. The control variables used in the study are ownership structure (promoter ownership, institutional ownership and foreign ownership), firm size, leverage ratio, firm age and sale to asset ratio. By using the feasible generalized least square method, the study found a positive association of environmental performance with financial performance of both categories of companies. In contrast, an adverse effect of research and development expenditure on performance has been observed. The study witnessed the moderating impact of research and development expenditure on the relationship between environmental and financial performance. The study found the mixed effect of ownership structure on the financial performance of manufacturing companies.

Board Attributes and Bank Performance in Light of Saudi Corporate Governance Regulations

This study investigates the relationship between various attributes of boards of directors on bank performance in light of Saudi corporate governance regulations. The data set of this study is extracted from the annual reports of all 12 banks listed on the Saudi Stock Exchange (Tadawul) over a period of 10 years from 2009 to 2018. To test the study hypotheses, check the robustness of the results, and address potential endogeneity issues, this study applies different statistical methods, including FGLS, OLS, RE, PLCSE, and 2SLS, using STATA version 17. The results of multivariate analysis show that board size has a significant positive influence only on operational bank performance (ROA). For board composition, the results show that while board independence has a significant negative impact on accounting-based performance (ROA and ROE), it affects positively and significantly the market-based performance (Tobin’s Q). Regarding board education, the results indicate that board members with at least a Bachelor’s degree have a significant negative impact on ROA and ROE. In contrast, PhD holders on the board have a significant positive impact on ROA and ROE, while Master’s holders affect positively and significantly all measures of bank performance. With respect to board diversity, only the CEO nationality has a significant positive effect on ROA and ROE. Board IT experience is found to be significantly and positively associated with ROA and ROE, while board meeting attendance has a significant positive influence only on ROE. These findings have important implications, especially for Saudi regulatory authorities to assess the current practice and compliance with the Saudi corporate governance regulations (SCGRs) and the principles of corporate governance for banks operating in Saudi Arabia (PCGB) regarding board characteristics and provide insights to improve board effectiveness and corporate governance practice in general.

RELATIONSHIP BETWEEN FINANCIAL FAILURE AND PERFORMANCE: A RESEARCH ON BORSA ISTANBUL COMPANIES

Financial failure refers to the situation in which the company changes or terminates its activities due to the inability to fulfil its financial obligations. Many studies have been carried out in order to predict this undesirable situation. Various models have been created in accounting-based studies using financial ratios. The most widely used of these models are Altman (1968), Springate (1978), Ohlson (1980), Fulmer (1984), Zmijewski (1984) and Grover (2001). The results obtained by using these models are followed by many stakeholders and accepted as the risk indicator of the enterprise. In this study, the relationship between the financial failure scores of 39 companies traded in the industrial sector in Borsa Istanbul between 2017 and 2021 and their market performance is analyzed separately. As a result of the study, it is seen that there is a positive and significant relationship between the Z-score value of the Altman (1968) model, which is an accounting-based financial failure model, and the Market Value/Book Value (M/B) ratio, which is a market-based performance indicator. These results show that investors invest more in companies with a low risk of financial failure since an increase in the Z-score means a decrease in the probability of financial failure of the business. However, in the research, no significant relationship is found between the scores of other financial failure models and the market-based indicator M/B. Keywords: Financial Failure Forecast Models, Financial Performance, Financial Failure, Borsa İstanbul, Bankruptcies

Benchmarking strategic core competencies of performance across Chinese and South Korean manufacturing companies

PurposeThis study empirically investigates the significance of the core competencies on various economic performance indices by utilizing accounting and market-based performance in Chinese and South Korean leading manufacturing companies.Design/methodology/approachThis research employs a series of hierarchical regression models to test the hypotheses concerning the significance of R&D and export strategy on firms' performance.FindingsThis study finds that R&D intensity and foreign trade activities through export are most likely to be significantly associated with firm performance, particularly market-based performance, across the Chinese and South Korea manufacturing companies. The significance of other core strategic factors such as capital intensity, leverage, inventory turnover, labor productivity, administrative cost efficiency, and collection policy on performance was also contemplated.Originality/valueThe relationship between R&D and firm performance has been an interesting issue concerning the performance measures employed across different country settings. Research issues addressed in this paper relate to how R&D, and foreign trade by export influence firm performance across two diverse economic environments inherent of Chinese and South Korean leading manufacturing firms. Particularly, this study explores the directions and magnitudes of the operational and strategic relationships between key strategic factors, such as R&D intensity, export by foreign trade, and the firm's economic and market-based performance.

Community development and community food in Lincolnshire, United Kingdom: The limitations of neoclassical economics

ABSTRACT Community development in the UK has moved from private philanthropy in the early 20th Century through welfarism to a ‘marketisation’ in the 21st Century with both state contracts, and market-based performance measures. But neoclassical economics, on which such marketization is based, is an inadequate measure of community development practice as it does not accommodate a range of inequalities, spatial differences, changes over time, market failures and externalities, all of which are at the core of community food projects. Whilst community food projects address market failures, they can use innovative market mechanisms to “cushion” some of these neoclassical economics failings. A number of practical examples is offered, from Lincolnshire UK, of such innovations in relation to community food production, and environmental, food waste, and food poverty externalities.

Rule with an iron hand: powerful CEOs, influential shareholders and corporate performance in Russia

PurposeThis study examines whether CEO power influences the book-based and market-based performance of Russian companies when it is restricted by the presence of essential shareholders, namely, state and influential businessmen.Design/methodology/approachManagerial power is divided into structural, ownership, expert and prestige. The proposed power metrics include not only CEOs but also the board of directors' characteristics that may restrict or enhance CEO power. The empirical analysis is based on the sample of 90 large traded Russian firms, which shares are included in the Moscow Stock Exchange Broad Market Index (MICEX BMI), observed from 2012 to 2019.FindingsPanel data analysis suggests that higher board ownership and tenure may restrict CEO power, which in turn would be beneficial for corporate performance. the authors also see that in companies owned by influential businessmen, CEO power influence on M/B value is more negative, while state ownership does not moderate it. CEO power metrics, based on political experience and tenure, affect corporate performance differently in companies affiliated with extractive industries.Originality/valueFirst, the authors consider two channels through which a company in emerging markets may get additional resources: CEOs and influential owners. Second, the authors develop power metrics based on Finkelstein's managerial power classification (1992) and the idea of relative power proposed by Bebchuk et al. (2011). It allows identifying whether the board of directors' may constrain or enhance CEO power to raise corporate performance. Third, the authors analyze developing Russian markets that represent a good ground for testing the question, whereas empirical research on Russia is relatively scarce (Grosman and Leiponen, 2018). Fourth, the authors pay particular attention to the CEO power in the extractive industry, strategically important for the Russian economy.

Non-financial information and company market value

Directive 2014/95/EU and the recent importance of the social and environmental sustainability topic have increased the interest of scholars, practitioners, investors, and other stakeholders in nonfinancial information aspects. This article examines the impact that the level of disclosure of nonfinancial information, as dictated by the European Union (EU) directive, has on market value. It measures the effect of some variables of nonfinancial information (proxied by the adoption of the Glob-al Reporting Initiative [GRI] "core" or "comprehensive" option or the GRI "refer-enced-claim" option, the number of pages of the nonfinancial statement, the presentation of the statement separate from or aggregated with the annual report, and the use of the same or a different auditor for the statement and annual report) on the level of market value measured by market-based performance (Tobin's Q). The analysis was tested on Italian listed companies that presented nonfinancial statements during the 2017-2019 period. The research, conducted on the 2019 nonfinancial statements, shows that all investigated companies apply GRI stand-ards. The empirical results furthermore show that the examined variables are not related to market performance and are not significant. These results lead to poten-tially contradictory findings. Whereas the adoption of generally recognized Corpo-rate Social Responsibility (CSR) standards - being voluntarily adopted by all the investigated companies - is deemed crucial by stakeholders, the details of CSR information, by contrast, do not seem to have an impact on market value.