Moderating Effect Of Firm Age Research Articles

Relationship between Financial Risk Exposure and Non-Performing Loans of Commercial Banks in Kenya

Currently, there is a financial crisis affecting commercial banks in Kenya occasioned by high levels of loan loss provision as a result of Non-Performing Loans. The past decade has seen the collapse of major banks like Chase Bank among others. This trend on Non-Performing Loans of the institutions requires urgent measures to reverse failure to which the entire sector is likely to collapse, and customers would lose a significant amount of their deposits. This study sought to investigate the effect of credit risk and liquidity risk on non-performing loans (NPLs) of commercial banks in Kenya and appraise the moderating effect of firm age on the relationship between financial risk exposure on non-performing loans of commercial banks in Kenya. The study was underpinned by liquidity preference theory. The examination adopted a positivist paradigm guided by explanatory research design. The study targeted 40 commercial banks as the unit of analysis while branch managers, operations and risk managers were the units of observation drawn from the banks adding to 120 respondents and census was used. The study collected both primary data using structured questionnaire on the independent variable and secondary data from publications by Central Bank of Kenya (CBK) and respective banks and the same was analyzed through the statistical package for social sciences (SPSS) version 26 in a descriptive and inferential manner. The study established that credit risk (p<0.05) and liquidity risk (p<0.05) were all found to have significant effect on NPLs of commercial banks in Kenya and significantly moderated by their sizes. It was concluded that financial risk exposure has significant effect on NPLs of commercial banks in Kenya. It was recommended that finance manages working in commercial banks in Kenya to balance the investment in short term and long-term assets to maintain operational liquidity levels for better management of liquidity risks. Credit managers working for commercial banks in Kenya need to review the existing credit risk management efforts and mechanisms to minimize exposure to NPLs.

The role of debt maturity in stock price crash risk: a comparison of developing and developed Asian economies

PurposeThis study examines the impact of debt maturity structure on stock price crash risk (SPCR) in Asian economies and the moderating effect of firm age on this relationship.Design/methodology/approachThe study utilized annual data from 432 nonfinancial firms publicly listed in six Asian countries: China, Hong Kong, Japan, Singapore, Pakistan and India. The observation period covers 14 years, from 2007 to 2020. The sample was categorized into three groups: the entire sample and one group each for developing and developed Asian economies. A generalized least squares panel regression method was employed to test the research hypotheses.FindingsThe results suggest that long-term debt has a significant negative influence on SPCR in Asian economies, indicating that firms with high long-term debt experience lower future SPCR. Moreover, firm age negatively moderates this relationship, implying that older firms may experience a more pronounced reduction in SPCR due to high long-term debt. Finally, firms in developed Asian economies with high long-term debt are more effective in mitigating the risk of a significant drop in their stock prices than firms in developing Asian economies.Originality/valueThis study contributes to the literature in several ways. To the best of the researcher’s knowledge, this is the first of such efforts to investigate the relationship between debt maturity structure and crash risk in Asia. Additionally, it reveals that long-term debt influences SPCR directly and indirectly in Asia through the moderating role of firm age. Lastly, it is likely one of the first studies by a research team in Asia to compare the nonfinancial markets of developed and developing Asian countries.

Advertising and financial performance: insight from a competitive market in Africa

PurposeThis study aims to examine the relationship between advertisement expenditure and firm performance as well as the moderating effects of firm age and size on this relationship.Design/methodology/approachTwenty-eight selected companies listed on the Nigerian stock exchange were examined. The study used multiple regression, a quantitative research method, to capture both the direct and moderating effects.FindingsThe findings show that advertisement has a positive relationship with sales but an insignificant relationship with return on asset. Furthermore, the results indicate that larger firms outperform smaller ones when using advertisements to enhance their sales. On the contrary, there is no significant difference between the use of advertisement by young and older firms in improving financial performance.Originality/valueDue to the often-wrong use of resource base view in the advertisement–performance relationship and contradiction in research findings, this paper re-conceptualize advertisement as a necessary investment (just like plant and equipment) but not an investment that provide strategic value. The paper also makes novel argument by theorizing a negative relationship between advertisement and firms’ performance in the Nigerian context.

BOARD GENDER DIVERSITY AND SUSTAINABILITY REPORTING: MODERATING EFFECT OF FIRM AGE OF NIGERIAN INDUSTRIAL GOODS FIRMS

The numerous activities and unethical attitude of organizations which have been linked to climate change and other environmental disaster have made disclosure of the impact of organizational activities on the society and the environment imperative. In view of this, this study examined the effect of board diversity on sustainability disclosure, with moderating effect of firm age in the Nigerian industrial goods firms. This study is for a period of 11 years (2009 – 2019). The population of this research work are all the 14 listed industrial firms in Nigeria of which 2 companies were filtered out due to lack of comprehensive data for the period of study indicating 12 listed companies as the sample size. The data were generated from the annual and sustainability reports of the sampled firms using the Global Reporting Initiative (GRI) checklist as a yardstick. One hundred and thirty-two (132) set of reports were analyzed using multiple regression analysis. Results from the data analysis revealed a significant positive effect of board gender diversity on sustainability disclosure. A further analysis revealed a strengthening effect of the moderating variable (firm age) on the relationship between board gender diversity and sustainability disclosure. This study therefore, concluded that firm age significantly moderates the relationship between board gender diversity and sustainability disclosure. This study recommends that more female directors should be encouraged on the boards of Nigerian firms (both young and old) because of their sensitivity to the environment and people generally which usually help them make decisions that will favour the environment and the generality of the people leading to more sustainability activities and disclosure.

Prior partnering experience and preferred alliance partner diversity of small firms

PurposeThis study investigates how small firms develop preferences for varying levels of alliance partner diversity by applying a behavioral perspective.Design/methodology/approachData were collected via an original survey administered by the Swedish National Bureau of Statistics (SCB) of 1,026 Swedish firms with 50 employees or less. Hypotheses were tested by specifying a series of fractional response regressions.FindingsThe results show a U-shaped relationship between experienced and preferred alliance partner diversity in small firms and further show moderating effects of firm age, prior growth and environmental dynamism. The findings suggest that preferences towards diverse alliance portfolios in small firms may arise, not only from well-informed deliberate strategic thinking based on prior experience, but also as a consequence of cognitive bias.Practical implicationsThe findings suggest that (1) small firms considering a wide variety of alliance partners should carefully investigate whether they are, in fact, capable of mastering a highly diverse alliance portfolio or if they are overconfident novices. (2) Holders of homogenous alliance portfolios should recurringly investigate whether homogeneity is due to informed strategy or inertia.Originality/valueThis study contributes to the literature on alliance partner diversity and behavioral alliance portfolio configuration by shedding light on the learning mechanisms that shape alliance portfolio strategies of small firms by explicating the complexity of how different experience levels of partner variety affect current alliance portfolio preferences.

Green entrepreneurship and SME performance: the moderating effect of firm age

Green entrepreneurship has been increasing with growing attention to environment protection by a variety of stakeholders. Green innovation, as the essence of green entrepreneurship, has attracted a broad range of scholarly attention with yet inconclusive findings regarding its effect on firm performance. According to our analyses of 1667 firms listed on SME board and GEM in China during the period from 2010 to 2019, we find interesting results regarding the type of green innovation involved and the moderating effect of firm age on the link between green innovation and SME performance. More precisely, we find green utility-model innovation positively influences firm performance for SMEs, whereas green invention innovation does not contribute to firm performance overall. More interesting, our empirical results suggest that older firms benefit more from both green invention innovation and green utility-model innovation than younger firms. This research contributes to the literature on green entrepreneurship as well as green innovation.

Too good to say goodbye? Effect of stakeholder orientation on the survival of large firms

This study examines the impact of stakeholder orientation, defined as the extent to which a firm adopts policies and management processes to identify, understand and integrate the interests of its stakeholders, on the survival of large firms. We suggest that stakeholder orientation facilitates external support and organizational adaptation. Stakeholder-oriented firms are better positioned to understand and adapt to changes in a competitive landscape. Additionally, stakeholder orientation might buffer firms against external jolts, thereby increasing survival rates. We validate our arguments using a dataset of 733 US firms included in S&P 500 index from 2003 to 2018. We find that stakeholder orientation improves firm survival. Furthermore, we test the moderating effect of firm age and environmental munificence on the survival consequences of stakeholder orientation. We show that being stakeholder-oriented turns into higher chances of survival as firms age and operate in less munificent industries.

Cage the Songbird: An experiment testing the impact of formalization on firm performance

Prior research on formal structure and firm performance has explored age-related contingencies of the relationship. However, scholarship in this area has not explicitly teased apart the differential impact of firm age and size despite evidence that the two should be treated separately. In this study, we disentangle the moderating effects of firm age and size on the formalization–performance relationship using a randomized controlled experiment with a sample of 3,500 small and medium enterprises in Peru. Our Results demonstrate that increased formalization leads to higher firm performance. This relationship is more pronounced for larger ventures, the benefits of formalization increase as a firm grows. However, contrary to expectations and past research, firm age had no moderating effect on the formalization–firm performance relationship. The results are surprising because prior research has argued that firm age is a key driver of this relationship. Yet, we show that firm age has no impact on the relationship when age-related hypotheses are tested using a randomized experiment. Rather, firm size appears to be the essential driver of whether formalization increases firm performance in dynamic settings.

Does it pay for new firms to be green? An empirical analysis of when and how different greening strategies affect the performance of new firms

Despite the significant attention devoted to the impact of corporate greening strategies on firm performance, research has so far focused on established firms, leaving the situation in new firms unclear. In this study, it is hypothesised that the impact of greening strategies on the performance of new firms depends on the type of strategy, and that the firm's age positively moderates this impact. Using a cross-sectoral dataset of 11,039 new firms from 36 countries, binary and ordinal logistic regressions were estimated for different start-up phases. The results indicate that new firms benefit from substantive greening strategies but, contrary to expectations, not from symbolic greening strategies. The performance of new firms in their later start-up phases was even found to be harmed if they adopt symbolic strategies but do not reinforce them with substantive actions (green-washing). No impact, or only a weakly positive impact was found for firms adopting both substantive and symbolic greening strategies (green-highlighting) or only substantive ones (brown-washing). Furthermore, the interaction analyses did not reveal any moderating effects of firm age, but additional investigation shows that the impacts of greening strategies do differ between age groups. Finally, robustness tests reveal that the relationship between substantive greening strategies and the performance of new firms is not linear but decreases with increasing environmental efforts.

Examining network characteristic dynamics of kinship-based families on performance within Indonesian SMEs

PurposeThis study aims to examine the moderating effect of firm age and size on the relationship between network characteristics (network centrality, network density and tie strength) and firm performance. This study also aims to investigate the difference in the effect of network characteristics on the firm performance of Javanese and Minang ethnic enterprises.Design/methodology/approachAn explanatory research design was adopted, which involved a survey in the form of a structured questionnaire of target owners and managers of 34 Javanese ethnic enterprises in North Sumatra, Indonesia and 100 Minang ethnic enterprises in Yogyakarta, Central Java, Jakarta and Bogor, Indonesia. The data is analysed using structural equation modelling.FindingsThe findings of this study confirm resource dependency and social capital theory. Network centrality, network density and tie strength have a significant effect on firm performance. The results also show support for the moderating role of firm age on the relationship between network characteristics and firm performance. The moderating role of firm size is not supported. The comparative test of the influence of the three network characteristics on ethnic enterprise performance confirms that Javanese ethnic enterprises have identity-based networks, while Minang ethnic enterprises use calculative-based networks.Originality/valueThe originality of this study lies in the investigation of the role of family and external partners in the running of ethnic enterprises at start-up and during the growth phase. The definition of “family” is based on a kinship perspective due to the specificity of Asian cultures, particularly in Indonesia. Of the hundreds of tribes in Indonesia, the Javanese and Minang were chosen because both are well-known as entrepreneurial tribes, have unique cultural values and have active migrants to other provinces.

Perceived corruption, business process digitization, and SMEs’ degree of internationalization in sub-Saharan Africa

This paper contributes to international business literature by investigating the relationship between perceived corruption and the degree of internationalization (DoI) through business process digitization (BPD). Moreover, the paper examines the moderating effect of firm age on the correlation between perceived corruption and BPD. Using data collected from two sub-Saharan African countries—Ghana and Nigeria, the findings show that perceived corruption is positively correlated to BPD and this correlation is stronger among younger firms. Besides, the findings reveal that BPD is positively correlated to DoI. Moreover, the results of our analysis also indicate that BPD mediates the correlation between perceived corruption and DoI. The limitations of the study and the implications of its findings for researchers and practitioners are discussed.

The Influence of Alliance Ambidexterity on Innovation Performance and the Moderating Role of Firm Age

It has been argued that ambidexterity can be achieved by establishing strategic alliances with partners that occupy a downstream or upstream position in the innovation value chain (i.e., alliance ambidexterity), hence reconciling the tensions between exploration and exploitation. However, empirical tests confirming that this partnering strategy improves innovation performance are still scant. Therefore, in this paper, we aim at covering this gap by empirically analyzing the relationship between alliance ambidexterity and innovation performance. Furthermore, since firm age affects firms' commitment toward explorative and exploitative activities, we also examine the moderating effect of firm age on the abovementioned relationship. Results are based on a sample of 1017 biotechnology companies that have established, at least, one strategic alliance over the period 1982-2011. In detail, using a random-effects negative binomial regression, we find that alliance ambidexterity positively influences innovation performance, and firm age exerts a negative moderating effect.

Corporate Governance, Firm Age, and Leverage: Empirical Evidence from China

This study aims to analyze the influence of corporate governance on firm leverage. It also investigates the moderating effect of firm age on the association between corporate governance and leverage. Using a sample of Chinese listed firms, it addresses several issues that have been identified in the prior literature regarding capital structure. This study provides novel findings which reveal that CEO duality and board commissions have a statistically significant role in determining the leverage levels for NSOEs, however, the positive effect of board commissions established on leverage decreases as the firm ages. Board size, board independence and supervisory boards influence the leverage levels for SOEs, however, the negative effects of board independence and supervisory boards on leverage reduce as the firm grows older. Keywords: Corporate governance, leverage, firm age, Chinese listed firms DOI : 10.7176/RJFA/10-2-03

The earliness of exporting and creeping sclerosis? The moderating effects of firm age, size and centralization

By using a sample of 644 manufacturing firms in four EU countries and five regions, we investigate the earliness/exporting relationship. Firstly, we examine the firm’s ability to retain LAN over time as it gets older and bigger. Secondly, we examine the role played by the firm’s decision-making structure. Our results reveal that exporting sclerosis does set in, as age and size of the firm significantly and negatively affect the earliness/exporting relationship. In addition, however, we find that centralization plays a role in the sclerotic effects of size (though only weakly for age), exacerbating their moderating effects on the earliness/exporting relationship. Our study claims to contribute to internationalization research by advancing the idea that LAN is not path-dependent but subject to liabilities. Beyond age and size, we add the more nuanced “liability of centralization” to boundary conditions for retaining LAN. Theoretical and managerial implications emerge.

Business model design–performance relationship under external and internal contingencies: Evidence from SMEs in an emerging economy

We examined Business Model (BM) designs – performance relationship and the moderating effects of firm age and external environment on this relationship. Furthermore, we investigated the impact of simultaneously operating dual BM designs (i.e. novelty and efficiency) on firm performance and contingent effect of firm age on this relationship. Based on data from 241 Indian SMEs, our findings highlighted that BM novelty was of greater benefit to younger SMEs compared to mature SMEs, while BM efficiency was of greater benefit to more mature SMEs. The environmental dynamism positively moderated the relationship between BM novelty and performance but it negatively moderated the relationship between BM efficiency and performance. We also found that BM efficiency is more beneficial in a low, rather than a high, munificent environment but we found environmental munificence did not moderate the BM novelty and SME performance relationship. Finally, we found simultaneous deployment of BM novelty and BM efficiency resulted in an enhancement of performance among mature SMEs compared to younger SMEs. Our study not only adds to the limited literature on BMs in SMEs but also helps practicing managers and entrepreneurs to make informed choices about their BMs.

Profitable Growth in Emerging Markets

This paper examines the strategic choice between growth-oriented and profit-oriented strategies for emerging market firms. We develop and test hypotheses of how growth-oriented and profit-oriented strategic focus of emerging market firms affects their subsequent performance position in terms of achieving profitable growth. We contend that emerging market firms with a stronger focus on growth is less likely to achieve a position of high growth and high profitability in later stage. In contrast, a stronger focus on profit is more likely to achieve such a favorable position. We also examine the moderating effect of firm age on the proposed relationship. We test our arguments using a sample of Chinese firms between 2002 and 2009. Our study contributes important insights to strategic choices and performance for firms in emerging markets.

Moderating Effects of Firm Age on the Relationship between Debt and Stock Returns

ABSTRACTThis article investigates the moderating effects of firm age on the relationship between debt and stock returns. The system generalized method of moment’s results indicate that firm age has a positive moderating effect on the relationship between book debt and stock returns. The results are robust, as firm age positively moderates the relationship between market debt and stock returns. Moreover, firm age has a direct positive effect on stock returns. Results suggest that as firms grow older, they use their experience to make effective capital structure decisions (i.e., optimal debt-equity mix) to maximize debt interest-tax-shield and increase shareholders’ returns.

The moderating role of firm age in the relationship between R&D expenditure and financial performance: Evidence from Chinese and US mining firms

We examine the impact of Research and Development (R&D) on the profitability and sales of mining firms in China and the United States (US) and the moderating effect of firm age using Coarsened Exact Matching (CEM). For the combined panel of 168 major US and Chinese mining firms, we find that, on average, a firm engaging in R&D activities earns 4% to 11% higher sales and generates 4% to 13% more profits than firms that do not engage in R&D activities. We also show that, in the mining industry, firm age moderates the relationship between R&D activities and financial performance. A comparatively mature R&D active firm earns 4.4% more profit and generates 7.2% more sales than a younger non-innovative firm. The turning point at which R&D activities switch from making a negative, to positive, contribution to profit and sales is 37years and 22years, respectively. Our results are consistent with the liability of newness, meaning that firm investment in R&D takes time to have a real impact on bottom line measures of financial performance. We conclude with a discussion of the practical implications of our results for Chinese and US mining firms.

Process Innovation, Alliances, and the Interplay of Firm Age: Early Evidence from Italian Small Firms

<p>We investigate whether and how process innovation of small enterprises is influenced by allying with another firm. Drawing on resource-based view of the firm and integrating findings from studies on the liabilities of age and newness, we argue: 1) for a direct association between strategic alliances and process innovation, and 2) in favor of a moderating role of firm age on this relationship. The results from a representative sample of 159 Italian small firms shed new light on the role of strategic alliances in explaining process innovation, and support this proposal. We find a significant and positive relationship between strategic alliances and process innovation, and a moderating effect of firm age on this relationship. This suggests that a younger firm benefits more than an older one from the increase in process innovation activities occurring as a result of alliances with other firms. The age of the firm appears to dictate the nature of relationship between strategic alliances and process innovation. Significant and novel theoretical and managerial implications are discussed.</p>

Innovation and Competitive Advantage: Moderating Effects of Firm Age in Foods Manufacturing SMEs in Malaysia

Abstract This paper aims to examine the influence of innovation on competitive advantage in foods manufacturing SMEs in Malaysia and the moderating effects of firm age on innovation-competitive advantage relationship. Given the correlational nature of research, the researchers adopted a random sampling technique in Malaysian foods manufacturing SMEs. Mailed structured questionnaires were employed for the collected 220 foods manufacturing SMEs. Both descriptive and inferential statistics were used to answer the objectives and hypotheses of the study. Finding of the study revealed that innovation has a strong positive impact on the competitive advantage, in which innovation contributes 73.5 percent variance in competitive advantage. The results indicate that SMEs should invest in innovation to gain competitive advantage. The study also found the moderating effect of firm age on the influence of innovation on competitive advantage. The study suggests a framework for analyzing the impact of innovation on competitive advantage to be applied in other settings of Malaysian SMEs. The findings of this study may be used as a guideline for entrepreneurs to establish network with research organization and universities for innovative activities or program which ultimately may gain competitive advantage in the marketplace. This study contributed to the literature by empirically investigating the effect of innovation on competitive advantage, specifically in foods manufacturing SMEs in Malaysia. Findings and implications of the study are also discussed in this paper.