Proxy For Financial Performance Research Articles

The Nexus between Bank Specific Risk Management Practice and Financial Performance: A Study on Selected Commercial Banks in Ethiopia

This study aims to determine links and impacts of risk management practices of financial performance on commercial banks in Ethiopia. The sample banks included in this study consisted of eight commercial banks operating in Ethiopia. The study was used secondary data source and collected from audited financial statements reported by National Bank of Ethiopia and commercial banks from 2004-2013 fiscal periods to determine indicators of risk management practice. Then, the collected panel data was analyzed and described by basic statistical techniques such as descriptive analysis, trend analysis, Pearson correlation analysis and GLS fixed effect regression analysis was employed by using STATA version 12.0 Risk management practice surrogate by banks specific risk selected indicators on credit risk (non-performing loan ratio), operational risk (efficiency on assets utilization, bank size and cost ratio’s ) , liquidity risk (liquidity ratio’s) ,capital risk (capital adequacy ratio) and insolvency risk(total equity to total debt ratio) as explanatory variables while financial performance proxy by return on assets(ROA) used as dependent variables of the study. The findings of the study reveal that, credit and Liquidity, risk management practices have a negative and significant statistical impact on commercial banks’ performance Similarly, capital and insolvency risk management practice have negative and insignificant impact on commercial banks’ performance due to underinvestment or excessive holding of assets. Despite the fact that, operational risk management (efficiency and cost) practices have a positive and significant statistical impact on banks’ performance which, means that these banks not suffered managing this type of risk during the study period. On the other hand, operational risk management proxy by bank asset size ratio has positive and insignificant impact on financial performance of commercial banks’. Therefore it is suggested that, prudent risks management practices are required for banks on (credit risk, liquidity, capital risk, insolvency and operational risk) in order to protect the interests of investors as well as to maintain regulated healthy financial system all over the economy of the country by enhancing public trust.

The type and quantity of corporate social disclosures of German ‘Universal’ banks

Grounded in legitimacy theory and deductive in nature, this paper uses content analysis of annual report social disclosures of 169 German ‘universal’ banks belonging to three different categories (credit, saving, and cooperative) to report on the type and quantity of social disclosure by these banks, and to test seven hypotheses related to the nature of their social disclosures and their association with size, financial performance, corporate form, and other selected variables. The findings provide evidence of the importance of social disclosure for the German banking sector as a means to legitimize their business and relay to the society the extent of their fulfillment of social obligations. Greater importance is attributed to product and customers as well as human resource disclosures. In addition, a strong positive association is found between these disclosures and the size variables as well as the number of apprentices, whereas ROE and net profits as financial performance proxies provide evidence of a significant relationship. Furthermore, the findings indicate that the quantity of social disclosure varies with bank category, corporate form and listing status, but seems to be almost unrelated to bank age and overseas presence. These promising findings could be used to inform corporate social responsibility policies and practices of German banks; nevertheless, further longitudinal analysis to validate them over time is warranted.

Corporate social responsibility and stock prices: A study on the Italian market

This study investigates the impact of Corporate Social Performance on stock prices of Italian listed companies. The main stream of literature focuses on the relation between CSR and financial performance, showing contradictory results that still feed a debate, which has not yet reached a unanimous and widely shared position. Concerning the selection of the measure of performance, we chose stock prices as a proxy for financial performance, in order to measure the perception and reaction of financial markets to the companies’ socially responsible behaviors. Using different social performance indicators concerning environment, community and employment activities, we found evidence that a good social performance has a negative influence on stock prices in the Italian Stock Exchange Market. This phenomenon is particularly evident if the environmental strategies of the Italian listed companies are considered. Hence, the Italian investors perceive these practices as avoidable expenses reducing shareholders’ income and companies’ value and recognize a negative market premium, in terms of lower stock prices, to socially responsible enterprises. This evidence is consistent with the peculiarities of the Italian capitalism structure, which, because of its backwardness in CSR topics and related issues, seems to be not yet mature enough to evaluate appropriately the value of these policies

Right Issue: The Impact to Abnormal Return, Share Liquidity and Company's Financial Performance (Empirical Study at Companies listed at Indonesia Stock Exchange)

Objective - The aim of this research is to analyse the difference of abnormal returns, shares liquidity proxies by trading volume activity and a company financial performance proxies by current ratio and price earnings ratio before and after the rights issue. Methodology/Technique - Samples were taken by purposive sampling. Number of samples are 26 companies listed on the Indonesia Stock Exchange that take the right issue for the year 2006 -2012. Testing of the hypothesis was done by using paired sample t-test for normally distributed data and Wilcoxon signed rank test for data that are not normally distributed. Findings - The results of this study showed that there is a significant difference in share liquidity proxies by trading volume activity before and after the announcement of the rights issue. After the right issue there are decreasing the number of trading volume activity because shareholders prefer to maintain their proportion of the share capital. Novelty - The increasing number of companies listed on the Indonesia Stock Exchange showed that there is positive growth of capital market in Indonesia. To be sustain in the market, companies need to improve their competitive advantage by optimizing resource utilization such as financial resources. One of the corporate action to raise the capital is the right issue. Type of Paper - Empirical Keywords: Abnormal Return, Company's Financial Performance, Right Issue, Shares Liquidity.

Impact of Governance on Profitability, Liquidity and Gearing of Companies

This study investigates the relationship between two governance issues, i.e., ownership and board structure of Malaysian listed firms (between 2010 and 2012) and their performance in terms of profitability, liquidity and gearing. Structural Equation Modeling is applied and the data analysis tool used is Maximum Likelihood Estimation (MLE). The dependent variables used as proxies for financial performance are; profitability, liquidity and gearing, whilst the independent variables are; ownership retention (OR), board size (BS), percentage of executive directors (ED), percentage of independent directors (ID) and percentage of non-independent non-executive directors (NINED). It is conjectured that there is consistency across all components of ownership and board structure in terms of its relationship with the gearing of companies. With the exception of non-independent non-executive directors, all other components of board structure in this study seem to have an impact on the gearing of companies. In that respect, it can be concluded that a company’s ownership structure and board of directors who represent the shareholders have major concerns on the gearing of companies compared to other financial indicators, as the level of gearing of a company has important and long-lasting effects on the profitability and liquidity of companies. This study leads the path for further research on all aspects of a company’s gearing.

An Integrated Corporate Governance Framework and Financial Performance in South African‐Listed Corporations

AbstractThis paper investigates the relationship between an integrated corporate governance (CG) index and financial performance using a sample of 169 South African (SA)‐listed corporations between 2002 and 2007. We find a statistically significant and positive association between a broad set of good CG practices and financial performance. In a series of sensitivity analyses, we find that our results are robust to endogeneity, different financial performance proxies, alternative CG weighting scheme and firm‐level fixed effects. We further distinctively examine the link between complying with SA context‐specific stakeholder CG provisions and financial performance. In line with political cost and resource dependence theories, our results reveal a statistically significant and positive nexus between compliance with stakeholder CG provisions and financial performance.

Examining the Role of Fiscal Policy in Malaysian Stock Market

This paper analyzes the relationship between stock index and macroeconomic policies (fiscal and monetary) using quarterly data for Malaysia for 1999:Q1–2011:Q4. The change in stock index was used as a proxy for financial performance. The co-integration test utilizes to detect the existence of long run relationship between stock index and macroeconomic variables and develops a vector error correction model (VECM) to test the existence of short run relationship (elasticities) among the variables. The findings indicate that there exists long run relationship among stock index, fiscal and monetary tools. This indicates that fiscal and monetary tools play an important role in accelerating financial performance in Malaysia. However, monetary tools can work faster than fiscal tools. This result would give a signal to investors to strategize their investment decision in the short and long run.

PengaruhIntellectual Capital Terhadap Kinerja Keuangan Perusahaan Publik (Non Keuangan) di Indonesia

uBusinesses began to realize that the ability to compete not only in the ownership of industrial machines, but more on innovation, information systems, organizational management and human resource knowledge he had. An attempt will be able to compete when using competitive advantage gained through creative innovations produced by the intellectual capital of the company. Therefore, the Intellectual Capital (IC) has become a very valuable asset in the modern business world because it is necessary to create value added for the company. This study aims to determine the effect of IC on corporate financial performance. IC is an independent variable and the company’s financial performance as the dependent variable. Data used in this study is 215 public companies (non financial) in Indonesia from 2005 until 2008 which are listed on the Indonesia Stock Exchange (BEI). This research uses Pulic model (Value Added Intellectual Coefficient ™ - VAIC ™) as a measure of IC components that proxies with physical capital (vaca), human capital (VAHU), and structural capital (STVA). Partial Least Square (PLS) is used as a tool to test the effect of IC (VAIC ™) to the company’s financial performance, which the company’s financial performance proxies with the ROE, EPS and MBV. The results of this study indicate that: IC (VAIC ™) positive effect on company financial performance; IC (VAIC ™) positive effect on company financial performance in the future, the average growth of IC (ROGIC) no positive effect on corporate financial performance in the future front, and the contribution of IC (VAIC ™) against the company’s financial performance in the future will differ according to type of industry. Keywords: Intellectual Capital, (VAIC ™), the company’s financial performance, Partial Least Square (PLS).

The Relation between Corporate Social Responsibility and Stock Prices: An Analysis of the Italian Listed Companies

This study investigates the impact of Corporate Social Performance on stock prices of Italian listed companies. The main stream of literature focuses on the relation between Corporate Social Responsibility and financial performance, showing contradictory results that still feed a debate, which has not yet reached a unanimous and widely shared position. As far as the measure of performance is concerned, we selected stock prices as a proxy for financial performance. The idea behind this choice is the attempt to measure the perception and reaction of financial markets to the companies’ socially responsible behaviors. Using different social performance indicators concerning environment, community and employment activities, we found evidence that a good social performance has a negative influence on stock prices in the Italian Stock Exchange Market. This phenomenon is particularly evident if the environmental strategies of the Italian listed companies are considered. Hence, the Italian investors perceive these practices as avoidable expenses reducing shareholders’ income and companies’ value and recognize a negative market premium, in terms of lower stock prices, to socially responsible enterprises. This evidence is consistent with the peculiarities of the Italian capitalism structure, which, because of its backwardness in CSR topics and related issues, seems to be not yet mature enough to evaluate appropriately the value of these policies.

Venture Capital Sector in Pakistan: Ratio Analysis Approach for Financial Performance Assessment

The purpose of study is to rank the venture capital companies operating in Pakistan during the period of 2006-2009 on the base of their financial performance. Ratio analysis technique was used to rank the venture capital companies using profitability / efficiency ratios and total assets as proxies of financial performance. This study concludes that TRG Pakistan Limited is at first in ranking on the bases of return on assets (ROA), return on equity (ROE), and total assets, and at second on the base of earnings per share (EPS). AMZ Ventures Limited is at first on the base of earnings per share (EPS), at second in ranking on the bases of return on assets (ROA), return on equity (ROE), and total assets. TMT Ventures Limited is third on the bases of all ratios, and total assets. This is the first attempt that was made with an objective to facilitate the students, investors and management of company with useful information regarding financial performance of all venture capital companies operating in Pakistan.

Indonesian Financial Crisis Evidence: Bonding Mechanism of Free Cash Flow to Financial Performance

Financial crisis in Asia dispersed along the continent and struck Indonesia as well. Many firms in Indonesia suddenly showed financial distress that aggregated by their obligation on debt. Along with financial distress problem, is the problem with decreasing rate of investment opportunity. Agency theory argued that decreasing rate of investment opportunity will lead to expropriation of cash flow and or free cash flow of the firms by managers. Expropriation of cash flow will hurt firm value as well as shareholders wealth. The research focused on sensitivity of free cash flow to financial performance before and during crisis as a bonding mechanism of management self interest behavior. The research argued that as management decrease shareholders wealth, then sensitivity of free cash flow to financial performance will increase during crisis. Sample is non-financial firms listed on Jakarta Stock Exchange (JSX) from 1995 untill 2002. This research divide before crisis period from 1995 untill 1997, and crisis period from 1998-2002. The paper used factor analysis to compose a composite score for financial performance proxy, ordinary least square for regression analysis, and Wald test to test the sensitivity of free cash flow magnitude to financial performance. The composite score will reduce the lagging process result from the nature of point in time data (financial report) versus period of time data (stock market report). The result showed support for the hypothesis that shareholders will increase their sensitivity to free cash flow during crisis, to bond and monitor the management perquisites activities. The bonding mechanism for free cash flow will tighten and loosen when the investment opportunity sets change by economics shock (financial crisis period). The result also showed significant support for decreasing rate of investment opportunity sets during crisis.