Predictor Of Firm Performance Research Articles

Assessing the Impact of Accounting Analytic Capabilities on Firm Performance

ABSTRACT This study establishes the relevance of accounting analytic capabilities (AAC) as a predictor of firm performance (FP) in a controlled environment characterized by strong informal controls (IC) and an undercurrent of user resistance to embracing technology. Analysis of data from 118 accounting and finance professionals from India revealed that user resistance was rendered “not relevant” in predicting high FP. This connotes that, in settings of substantial IC and user resistance to change (RTC), AAC on their own can drive superior FP, since their benefits more than counter-balance user resistance to AAC. Furthermore, since this result is independent of firm size or industry type, it signals strong implications for practice and theory. The effectiveness of AAC in an environment of IC (and in the setting of user resistance) is established and discussed.

THE IMPACT OF ENTREPRENEURIAL MARKETING ON FIRM PERFORMANCE: MEDIATING EFFECT OF NETWORK DIVERSITY AND LEARNING CAPACITY; MODERATING EFFECT OF COMPETITIVE INTENSITY

This study investigates the role of entrepreneurial marketing as a predictor of firm performance. The research integrates variables of the dynamic interaction: mediating role of diversity of network and learning capability, moderating role of competitive intensity on the relationship between entrepreneurial marketing and performance of the firm.The study is explanatory in nature. To ensure the accuracy of quantitative results based on the experience of study participants, we employed a mixed method of qualitative and quantitative data collection. Data was collected in two stages: 1) field survey, 2) interviews of SMEs owners in Oman. The sample was purposively drawn from SMEs managers perceived to be knowledgeable about the tourism industry.No significant relationship was found between entrepreneurial marketing and firm performance. In addition, it was found that network selection mediates the relationship between entrepreneurial marketing and firm performance; however, learning capability does not.This study adds to the literature of the Omani market context on a strategic issue and provides managers with useful insights. Mixed methods provide a methodological contribution to understanding the dynamic relationship between variables presented in the entrepreneurship literature.

Best proxy to determine firm performance using financial ratios: A CHAID approach

Abstract The main purpose of this study is to investigate the best predictor of firm performance among different proxies. A sample of 287 Czech firms was taken from automobile, construction, and manufacturing sectors. Panel data of the firms was acquired from the Albertina database for the time period from 2016 to 2020. Three different proxies of firm performance, return of assets (RoA), return of equity (RoE), and return of capital employed (RoCE) were used as dependent variables. Including three proxies of firm’s performance, 16 financial ratios were measured based on the previous literature. A machine learning-based decision tree algorithm, Chi-squared Automatic Interaction Detector (CHAID), was deployed to gauge each proxy’s efficacy and examine the best proxy of the firm performance. A partitioning rule of 70:30 was maintained, which implied that 70% of the dataset was used for training and the remaining 30% for testing. The results revealed that return on assets (RoA) was detected to be a robust proxy to predict financial performance among the targeted indicators. The results and the methodology will be useful for policy-makers, stakeholders, academics and managers to take strategic business decisions and forecast financial performance.

Attention, Acquisition Costs, or Executive Information? Using Satellite Data to Uncover the Sources of Local Information

We use novel satellite data that track the number of cars in the parking lots of 92,668 stores for 71 publicly listed U.S. retailers to study the local information advantage of institutional investors. We establish car counts as a timely measure of store-level performance and find that institutional investors adjust their holdings in response to the performance of local stores, and that these trades are profitable on average. These results suggest that local investors have an advantage when processing information about nearby operations. However, some institutional investors do not adjust for the quality of their local information and continue to rely on local signals even when they are poor predictors of firm performance and returns. This overreliance on poor local information is reduced for institutional investors with greater industry expertise and those with greater incentives to maximize short-term trading profits.

Does Board Capital Matter? A Meta-Analytic Review of the Board Capital and Performance

Prior research suggests that board capital is a predictor of firm performance because directors perform their responsibilities more effectively when they possess human and social capital resources....

Women directors contribution to organizational innovation: A behavioral approach

This paper aims to analyze the relationships between women directors (a demographic characteristic) and organizational innovation (a predictor of firm performance) by considering the mediating role of the board’s decision-making culture. To scrutinize board processes and behaviors, we use survey data to test our hypotheses on a sample of 341 Norwegian firms. The results suggest that women directors contribute positively and significantly to organizational innovation. Furthermore, the positive relationship between women directors and the level of organizational innovation is mediated by some decision-making culture dimensions: the degree of cognitive conflict and the degree of preparation and involvement during board meetings. Implications for theory and practice and future research directions are discussed.

Perceptions of transformational leadership (TFL) style: A study on Malaysian cooperative board of directors

This paper is a pilot study that examines the perceptions of transformational leadership among cooperative movements’ boards. Past studies have shown that transformational leadership is a strong predictor of firm performance (effectiveness). This study aims to examine on the perceptions of transformational leadership style among Malaysian cooperatives board of directors. Among the major problems faced by Malaysian cooperatives are the lack of board of directors’ commitments, directors failed to perform their duties effectively and weak leadership from Board of Directors which affected the board effectiveness and performance.

Evaluating the link between commercial governance ratings and firm performance in a cross-European setting

PurposeThe purpose of this paper is to explore the ability of commercial governance ratings (CGR) to predict firm performance.Design/methodology/approachBased on the review of the corporate governance literature, the authors pose five hypotheses on the relationship between CGR and firm performance. Then, the authors test these hypotheses for the latest version of the Institutional Shareholder Services Inc. (ISS) index (Quickscore) with a sample of firms formed by the constituents of the Standard and Poor’s Europe 350 stock market index.FindingsThe authors have not found a consistent significant relationship between Quickscore ratings and firm performance. This main result holds across a variety of checks.Research limitations/implicationsSome of the additional analyses are conducted with rather small samples. The results of these analyses have to be carefully taken. Recommendations for further research are offered.Practical implicationsThe results call into question the usefulness of CGR, marketed by influential consultant companies, and which are becoming increasingly popular among investors, as reliable predictors of firm performance.Originality/valueDespite an increasing body of research on the use of CGR as predictors of firm performance, the available research is heavily concentrated in the US market. No previous study has explored this relationship using the recently developed ISS index Quickscore in a cross-European setting. The use of a cross-country sample of companies allows the authors to address the impact of institutional factors on the CGR-firm performance relationship. Moreover, the authors do not limit the study to the overall scores of the index but examine also the partial scores (pillars) which intend to assess specific dimensions of governance. This makes the evaluation of the relationship more complex and challenging.

The Quality of Local Government and Firm Performance: The Case of China's Provinces

ABSTRACTExtending La Porta, Lopez-de-Silanes, Shleifer, and Vishny (1999), we examine the effect of local government quality on firm performance, since regional and firm research provides a more fine-grained analysis especially in countries where local administration is an integral part of the bureaucratic apparatus. Using a dataset of 7,873 Chinese listed firm-years for 1994–2006, we find a positive relationship between the quality of provincial government and firm performance, controlling for location and firm-specific governance variables. Among various government quality variables, we find that having a special economic zone depicting low taxes and bureaucratic efficiency is the best predictor of firm performance, followed by the degree of marketization, efficient property registration, and environmental protection. Most intriguingly, political freedom has a significant impact on firm performance and productivity, even in a regime where democracy is not practiced. This has never been documented before at a microeconomic level and barely so at a macro level, vindicating Hayek's (1944) theory.

Market structure-performance hypothesis in Kenyan banking industry

Purpose– The purpose of this paper is to test market structure-performance hypothesis in banking industry in Kenya. Specifically, the structure-conduct-performance (SCP) and market efficiency hypotheses were examined to determine how market concentration and efficiency affect bank performance in Kenya.Design/methodology/approach– The study used secondary data of 44 commercial banks operating from 2000 to 2009. Three proxies to measure bank performance were used while market concentration and market share were used as proxies for market structure. Market concentration was measured using two concentration measures; the concentration ratio of the four largest banks (CR4) and Herfindahl-Hirschman Index, while market share was used as a proxy for efficiency. The study made use of generalized least square regression method.Findings– The empirical results confirm that market efficiency hypothesis is a predictor of firm performance in the banking sector in Kenya and rejects the traditional SCP hypothesis. Thus, the results support the view that efficient banks maximize profitability.Practical implications– The study provides insights into the role of efficiency in enhancing profitability in commercial banks in Kenya. It has managerial implication that profitable banks ought to be efficient and dispels the notion of collusive behavior as a precursor for profitability.Originality/value– The paper fills an important gap in the extant literature by proving insights into what determines bank profitability in banking sector in Kenya. Although this area is rich in research, little work has been conducted in the developing economies and in particular no study in the knowledge has addressed this critical issue in Kenya.

High Performance Organizations Framework as a Predictor of Firm Performance in the Insurance Industry in Ghana

Changes in the business environment in general and in emerging countries, in particular, challenges business organizations to rethink new ways of managing performance in order to survive. This research applied an HPO framework to find out the extent to which it explains performance in the insurance industry in Ghana. The study adopted a quantitative deductive approach and analyzed the link between the HPO framework and firm performance using multiple regression. The findings revealed that three out of the five HPO factors, namely continuous improvement and renewal, and workforce quality and long-term orientation have positive influences on firm performance. The findings have useful implications for managers of companies in emerging countries.

Relationships Between Networking, Entrepreneurial Self-Efficacy and Firm Growth: The Case Of Slovenian Companies

Social networks represent the immediate environment in which entrepreneurs are embedded and they therefore have a great influence on entrepreneurs’ behavior. Entrepreneurs’ social networks can provide entrepreneurs and their firms with information, support and access to resources. The support of the environment is important for reinforcing self-efficacy which is recognized as a predictor of firm performance. In this study, we developed and empirically tested hypotheses about the relationships between networking, entrepreneurial self-efficacy and small firm growth. The findings show that entrepreneurs can enhance entrepreneurial self-efficacy through network support, and consequently contribute to relative firm growth. The study provides significant contributions to entrepreneurship network theory and holds important implications for theory and practice.

Meta-Analytic Review of Employee Turnover as a Predictor of Firm Performance

Previous research has primarily revealed a negative relationship between collective employee turnover and organizational performance. However, this research also suggests underlying complexity in the relationship. To clarify the nature of this relationship, the authors conduct a meta-analytic review in which they test and provide support for a portion of Hausknecht and Trevor’s model of collective turnover. The authors’ meta-analysis includes 48 independent samples reporting 157 effect size estimates ( N = 24,943), tests six hypothesized moderator variables, and provides path analyses to test alternative conceptualizations of the turnover–organizational performance relationship. Results indicate that the mean corrected correlation between turnover and organizational performance is −.03, but this relationship is moderated by several important variables. For example, the relationship is stronger in manufacturing and transportation industries (−.07), for managerial employees (−.08), in midsize organizations (−.07), in samples from labor market economies (−.05), and when organizational performance is operationalized in terms of customer service (−.10) or quality and safety (−.12) metrics. In addition, proximal performance outcomes mediate relationships with financial performance. The authors discuss implications of their results for theory and practice and provide directions for future research.

The marketing practices‐performance relationship in professional service firms

PurposeThe purpose of this paper is to investigate marketing practices in professional service firms (PSFs). PSFs' marketing practices are not well understood, despite their increasing importance to economies worldwide and recognition of their unique characteristics and the marketing challenges they face. The study also examined whether PSF performance outcomes is better modeled through a competency approach suggested by the resource‐based view, or through the extent of use (practices) approach.Design/methodology/approachEmpirical data were collected from professional service providers through an online survey of senior professional service providers across a range of services, including law, engineering, accounting and finance and management consultancy.FindingsResults show interaction marketing was the most common PSF practice and the combination of extent of use and competency, rather than extent of use alone, is a better predictor of firm performance. The results also demonstrate the relevance of the plurality of practices.Research limitations/implicationsThe study shows that transaction marketing and database marketing are particularly necessary for financial and market performance, while both interaction marketing and database marketing particularly underpin customer performance. All practices need to be conducted extensively and well for optimum outcomes. The study is cross‐sectional in nature and does not enable a judgment about causal inferences; rather, relationships between constructs are presented.Practical implicationsProfessional service providers should focus on competency of practice, as well as extent of practice. However, not all professional service providers do this. Importantly, having a customer service focus is not sufficient to achieve positive market and financial outcomes.Originality/valueThe results presented in the paper have important implications for researchers when modeling and measuring marketing practices and for professional service managers when undertaking marketing activities.

Do Customer Acquisition Cost, Retention and Usage Matter to Firm Performance and Valuation?

Abstract:  We examine the valuation role of customer acquisition cost, retention and usage in the wireless industry during the period 1997–2004. We develop and test a model that links customer acquisition cost, customer retention and call usage to future financial performance and valuation. In doing so, we control for the role of traditional accounting measures as predictors of firm performance. Although the wireless industry maintains a rapid pace of technological and commercial changes, fundamental accounting numbers are found to be value relevant. We provide new evidence that customer acquisition cost is likely a firm value driver. Specifically, we show that this cost is positively associated with customer retention, future profits and current market values. However, customer acquisition cost is not associated with future revenues, suggesting that successful investment in customer acquisition is capable of saving future expenses and hence of improving profitability. There does not seem to be a direct association between customer retention and usage. Nevertheless, we document a positive relation between retention and future revenues, as well as a positive association between usage and future profits. Collectively, these results suggest that retention and usage play an important mediating role linking customer acquisition with benefit generation. Consistent with this, we find some evidence that customer retention and usage enhance market values.

Do Customer Acquisition Cost, Retention and Usage Matter to Firm Performance and Valuation?

We examine the valuation role of customer acquisition cost, retention and usage in the wireless industry during the period 1997–2004. We develop and test a model that links customer acquisition cost, customer retention and call usage to future financial performance and valuation. In doing so, we control for the role of traditional accounting measures as predictors of firm performance. Although the wireless industry maintains a rapid pace of technological and commercial changes, fundamental accounting numbers are found to be value relevant. We provide new evidence that customer acquisition cost is likely a firm value driver. Specifically, we show that this cost is positively associated with customer retention, future profits and current market values. However, customer acquisition cost is not associated with future revenues, suggesting that successful investment in customer acquisition is capable of saving future expenses and hence of improving profitability. There does not seem to be a direct association between customer retention and usage. Nevertheless, we document a positive relation between retention and future revenues, as well as a positive association between usage and future profits. Collectively, these results suggest that retention and usage play an important mediating role linking customer acquisition with benefit generation. Consistent with this, we find some evidence that customer retention and usage enhance market values.

Immigrants as Extraordinarily Successful Entrepreneurs: A Pilot Study of the Canadian Experience

As extraordinarily successful entrepreneurs may come to lead large firms that are global players, explanations of extraordinary entrepreneurial success can usefully combine findings from entrepreneurship and strategy. Entrepreneurship considers personality traits and social networks as predictors of entrepreneurial success, while strategy considers firm resources and capabilities and membership in favourable industries as predictors of firm performance. Combining these insights, I suggest that effective personality traits and social networks may equip an entrepreneur to invest in and gain access to valuable resources and capabilities and to survive in a high-growth industry, and to thereby achieve extraordinary entrepreneurial success. On the basis that immigrants may be more likely than non-immigrants to have personality traits and social networks that are conducive to entrepreneurial success, I test and find support for the hypothesis that amongst highly successful Canadian entrepreneurs, immigrants will be more successful than non-immigrants.

Top Management Team Coordination Needs and the CEO Pay Gap: A Competitive Test of Economic and Behavioral Views

The need for coordinated decision making bears on the pay gap between a firm's CEO and its other top executives. A behavioral view suggests that because more equal pay promotes collaboration, greater coordination needs encourage smaller pay gaps, and the combination of greater needs and smaller gaps enhances firm performance. An economic view implies the opposite because larger gaps create tournament-like incentives that address monitoring problems associated with joint decisions. We found that although economic theory was a better predictor of the size of CEO pay gaps, there was a balance between the economic and behavioral views as predictors of firm performance.

DIRECTOR STRATEGIC CONTRIBUTION AND ORGANIZATIONAL PERFORMANCE IN ENTREPRENEURIAL FIRMS.

The influence of boards of directors on firm performance has been widely studied, and boards have been found to influence a variety of firm outcomes. Most research examining the effects of boards of directors on firm performance has been concerned with board composition issues in large firms. In those studies, board size, the existence of outsiders, and the proportion of outsiders on the board were frequently hypothesized to be predictors of firm performance. In studies of entrepreneurial firms, board size and board composition have also been viewed as predictors of firm performance. Two critical areas of governance minimally addressed by existing studies of either large or entrepreneurial firms are first, the role of boards of directors in private firms, and second, the strategic contribution of board members. Our research fills this gap by examining director strategic contribution in a sample of private, entrepreneurial firms. Our results suggest that the extent to which outside board members perform their strategy role has a significant, positive influence on firm performance. Insider contribution had no effect. We also found that both firm size and firm age are moderators of the relationship between board strategic contribution and firm performance. Specifically, we found that a board's strategic contribution has a more profound (and positive) influence on the performance of younger and smaller firms.