Romanian Companies Research Articles

Investment Strategies and Financing Approaches in Emerging Enterprises

Investment activities are arguably the most crucial factor in the development and sustenance of an enterprise, especially in emerging markets. While there have been numerous studies on the financing structure, there is a substantial gap in the literature regarding the impact of capital structure and cost of capital on investment efficiency in transitional economies. This research seeks to address this gap, using a mixed-method approach that combines qualitative case studies and quantitative financial analysis. The research involved conducting case studies with five enterprises from the technology, manufacturing, and services sectors. In addition, the researcher used secondary data obtained from the websites of the Bucharest Stock Exchange and the Romanian National Registry of Financial Statements. The data was used to calculate the Return on Investment, debt-to-equity ratio, and cost of capital. The analysis shows that businesses that adopt the optimal capital structure perform better, relative to their counterparts, in the aspect of profitability and market value. They also have a lower cost of capital, as well as greater financial sustainability. On the other hand, businesses with higher leverage perform poorly, with their failing market position forcing them to adopt measures such as providing discounts to customers and investing in motor vehicles to reduce operational costs. This research shows that even in the current state, some of the basic principles that have traditionally applied still have bearing. However, there are some underlying problems, some of which have been highlighted in Nenite-Petrescu et al.’s case study of three Romanian companies. Some of the factors which have been identified as contributing to the negative performance of the three companies include poor return on assets, return on capital employed, and return on investment; low levels of liquidity; low sales and profits; and high cost of Sales, as well as low purchase and employment of personnel. All these factors represent significant inefficiencies in the aspect of capital unproductivity for the businesses. Some of the lessons learnt from the analysis include the non-recognition of business risks and their mitigation. A business should consider the various events and circumstances that may impact negatively on their ability to meet obligations toward obligations taken by such businesses. In conclusion, enterprises need to manage their financing strategies to ensure that they minimize their risk, while maximizing their long-term growth potential. This research will prove important for future researchers and business enterprises in transitional economies.

Introducing a novel fragility index for assessing financial stability amid asset bubble episodes

This paper is devoted to the development of an innovative fragility index designed to capture comprehensively the dynamics of financial stability during periods characterized by asset bubbles. Utilizing a multifaceted methodological framework, the study begins by identifying bubble occurrences and calculating the delta CoVaR systemic risk metric. Building on established macroeconomic methodologies, we then propose an indicator to quantify the impact of financial bubbles on the stability of an emerging market. Specifically, we construct two coincident indicators based on daily observations of financial stability for the twenty most liquid Romanian companies. The first indicator is derived from the delta CoVaR values of these companies, while the second is computed using the residuals of a model that employs the same financial stability metric as the dependent variable, with a binary variable representing the presence of asset bubbles as the explanatory factor. This second coincident indicator tracks financial stability in the absence of bubble effects. The disparity between these two indicators forms the basis for the creation of an index, termed the “bubble fragility index,” which measures the overall susceptibility of financial stability to asset bubbles. In the context of the Romanian market, this study demonstrates that periods marked by asset bubbles are associated with elevated systemic risks. Our findings indicate that the presence of bubbles significantly intensifies financial risk factors, creating conditions conducive to severe market corrections and economic downturns. We identify specific intervals during which fragility reaches peak levels, including June to September 2018, December 2018 to March 2019, March 2020, and March 2022.

How Do Listed Romanian Companies Comply with or Explain Good Corporate Governance Guidelines?

How Do Listed Romanian Companies Comply with or Explain Good Corporate Governance Guidelines?

AN EXPLORATORY ANALYSIS OF ACCOUNTING ESTIMATES DISCLOSURE PRACTICES. THE CASE OF ROMANIAN PRIVATE LISTED COMPANIES

The research aimed to identify and evaluate the level of disclosure of accounting estimates in the annual reports of companies listed on the Bucharest Stock Exchange (BVB) on the premium segment. Excluding the banking sector and suspended companies from the total premium companies, 55 companies were identified in the sample. The companies' annual reports for 2018-2022 were analyzed to identify accounting estimates and any changes in these estimates. For each business, a score of 1 was assigned for changes in estimates and 0 for non-change. Using qualitative research methods, the set of data on accounting estimates was obtained by examining public information in the notes to the annual financial statements. The analysis of descriptive statistics was carried out to interpret the data, classifying companies according to turnover, total assets, average number of employees, and net result. Companies were also clustered into three categories, and the analysis highlighted industries with varying levels of disclosure. These findings provide insights into the level of disclosure of accounting estimates among Romanian companies listed on BVB, with stakeholder involvement and policy development for sustainable economic development.

How Do Listed Romanian Companies Comply with or Explain Good Corporate Governance Guidelines?

How Do Listed Romanian Companies Comply with or Explain Good Corporate Governance Guidelines?

Reporting Sustainable Development Goals (SDGs) in Romanian listed companies

A significant challenge facing companies is to identify and implement sustainable best practices within their corporate strategies in order to align with the UN Sustainable Development Goals (SDGs). This study aims to assess companies' perspectives on sustainable development and their approaches to its integration, focusing in particular on the social dimension. The research aims to examine the reporting of the SDGs adopted and implemented by four listed companies. Using a case study methodology, this article analyses the sustainability reports of OMV Petrom, One United Properties, Sphera Franchise Group and Alro for the year 2022. In addition to sustainability disclosure requirements, these reports provide information on the impact of companies on environmental, social and governance factors. Specifically, the inclusion of information related to the SDGs in the sustainability reports of these four companies differentiates them, as they represent a minority among Romanian companies in reporting such data. The novelty of the study consists in its contribution to the existing literature by providing an insight into the sustainability practices adopted and implemented by major Romanian companies.

Innovation and Digital Transformation in the Business Environment: A Case Study on Analyzing the Impact on Organizational Performance in a CAD Company

Abstract This article makes an exploratory attempt to study the impact of implementing a computer-aided design (CAD) system on a Romanian company. The firm has been established in 1998 and it is based on Baia Mare (Maramures), Romania. It is the commercial administrator of the CAD/CAM Technology Support Center. This center was a project initiated within the Maramureş Center for the Development of Small and Medium Enterprises (SMEs), and it received funding from the PHARE FIDEL program, an European Funded program that supported at that time the development of SMEs). Using a multifaced approach encompassing semi-structural interviews and financial analysis data, the results show integration of innovative CAD technologies yields substantial gains for operational efficiency. For instance, most of the KPIs associated with production have improved: the time required to complete one cycle of production has decreased by 15%, from an average of 20 hours to 17 hours per unit and the efficient use of materials has increased by 10% resulting in cost savings. This research shows how Romanian companies can adopt CAD technologies and improve their activities.

Artificial Intelligence – Opportunities and Challenges for Small and Medium Enterprises in Romania. A Case Study on the Exonia Group

Abstract The economy of Romania is changing quickly, and small and medium-sized enterprises are at a stage where implementing artificial intelligence could make all the difference. Small and medium enterprises that do not have sufficient cash or specialised knowledge find this hard to apply, according to the literature. This paper tries to connect the dots by analyzing the relationship between small and medium enterprises and artificial intelligence in Romania through document analysis and a case study of Exonia, a group of Romanian companies that successfully implemented artificial intelligence in their businesses. The methodology also entails the analysis of graphs based on the digital economy and society index, exemplifying the latest information regarding the position of Romania in respect of small and medium-sized enterprises (and not only) that implemented artificial intelligence compared to the other countries in the European Union. Exonia's example shows how small and medium enterprises can make artificial intelligence an opportunity to obtain more efficient operations and happier customers. This paper was co-financed by The Bucharest University of Economic Studies during the PhD program.

Research on Data Security Measures in Romania

Abstract Information from the online environment is constantly increasing, as well as its value. In this context, for companies data security becomes a central pillar to protect sensitive information and to ensure its integrity, confidentiality and availability (CIA Triangle). The security measures adopted by the companies also increase the degree of trust of their partners and customers. But data security is not just about implementing the right technologies and policies; equally important is the awareness and proper training of personnel who interact with this data or the applications that contain it. Human resource in companies playes an important role in protecting sensitive information by understanding the negative conseques of not securing and manipulating in a risky manner the confidential data used in their daily activies. To prepare the human resource and educate the employees in order to raise their awarness towards which is considered sensitive data, what measures and tools must be applied when handling it, trainings by specialisez personnel can be implemented. In this manner, the risks of cyber security attacks, data leak, are minimized and the business environment is strengthened. In this research it is presented a review of specialized literature that treat the subject of data security to highlight the current stage of development and have a general landscape from a scientific point of view. Having this as a base, the authors have developed a questionnaire that was distributed to romanian companies to find out the business perspective towards this subject. Therefore, by analysing the two perspectives, this study has the goal to present the dynamics of data security, the challenges brought by it and the good practices that can be addopted.

The Impact of Environmental Volunteering on Employees, Companies, and Local Communities: A Case Study on Romanian Companies.

This paper addresses the importance of organizational environmental volunteering as part of the corporate social responsibility (CSR) strategies of organizations. If more organizations support their employees' involvement in such projects, there can be hope for mitigating climate change and making the transition to a more sustainable world. We used partial least squares structural equation modeling to analyze the impact of management support on organizational environmental volunteering and of the latter on the employees' well-being and productivity. Making environmental volunteering part of an organization's CSR strategy can help the environment, the employees, and the organization itself. The results show a direct and positive relationship between management support and organizational environmental volunteering and between the latter and both the well-being and productivity of employees. The findings will help managers in both public and private organizations to better shape their strategies and encourage their employees to get involved in projects meant to reduce pollution and the carbon footprint.

How well do the companies responsible for facilitating the digital transition perform? An analysis on Romanian ICT sector

PurposeThis study proposes an analysis of the performance of companies that have assumed the responsibility of facilitating the digitalization of economic activities. Because of their potential to accelerate digitization, these companies have been financially supported. The monitoring of the performances recorded by these companies, including the evaluation of the impact of different determining factors, meets both the needs of the financiers (concerned with the evaluation of the efficiency of the use of nonreimbursable financing) and the needs of continuous improvement of the activities of the companies in the field.Design/methodology/approachThe study assesses performance dynamics and the impact of its determinants. The model allows achieving a simplified vision of performance and its determinants, supporting decision-makers in the management process. The construction of an estimation model based on the multiple regression method was considered. Robustness tests were performed on the results, using parametric and nonparametric tests.FindingsThe results of the analysis at the level of the extended sample indicated that, during the analyzed period, the economic and commercial performances decreased, and significant influences in this respect include the financing structure, sales dynamics and volume of receivables. The analysis at the level of the restricted sample confirmed these interdependencies and provided additional evidence of the impact of other determinants.Research limitations/implicationsThe study contributes both to performance research and to the assessment of the prospects for accelerating digitalization in support of economic activities. Since the empirical research was carried out on a sample of Romanian companies that provide services in information technology, which accessed nonreimbursable financing, the representativeness of the results is limited to this sector. For the analyzed sample, the study provides support for improving performance.Practical implicationsThe results of the study prove to be useful from a microeconomic and macroeconomic perspective as well, as they provide evidence on the performance of companies that have implemented information and communication technology (ICT) projects and on the efficiency of the use of non-reimbursable funding dedicated to business support.Originality/valueThe study fills the literature gap regarding the performance of companies that have developed ICT projects and received grant funding for the implementation of these projects. The literature review indicated that there are few studies conducted on these companies, which did not include Romanian companies.

Is tax avoidance one of the purposes of financial data manipulation? The case of Romania

PurposeCompanies avoid taxes in a variety of ways and use different methods to do that, one of the most common being earnings management. The purpose of this paper is to investigate whether companies manipulate their financial data in order to reduce taxes paid.Design/methodology/approachWe considered a sample of 63 listed Romanian companies for the period 2016–2021. The Beneish model was used for estimating earnings management, and the effective tax rate was used to measure tax avoidance. The analysis was carried out using regression analysis in Stata13 software.FindingsThe findings of the research indicate a negative and statistically significant association between effective tax rate and earnings management, implying that one of the main reasons why companies manipulate their earnings to reduce tax burden and avoid taxes. Moreover, our results show that return on assets (ROA) has a statistically significant negative influence on the effective tax rate. Furthermore, our analysis reveals that firm size, growth, and Big4 audit have no effect on effective tax rate.Research limitations/implicationsBecause it analyzes concrete cases using financial data and provides some recommendations for addressing the issue of tax avoidance, this work is useful in advancing both quantitative and qualitative research on this topic. This research is relevant for businesses, governments, regulators, audit professionals and investors.Originality/valueThe study, by analyzing concrete cases using reported financial data, contributes in filling the gap within the literature that results from a lack of scientific research on the relationship between tax avoidance and earnings management, and then it clarifies the nature of the causal connection between them. Moreover, it considers a combination of firm related variables including performance, size and also audit quality.

Double Materiality Disclosure as an Emerging Practice: The Assessment Process, Impacts, Risks, and Opportunities

The Corporate Sustainability Reporting Directive 2022/2464 (CSRD) introduces the concept of double materiality in the preparation of sustainability reports in the European Union (EU) starting in 2024. Our research aim is to provide ex-ante empirical evidence on how large Romanian enterprises perform materiality assessment and disclose impacts, risks, and opportunities. Data are collected from 20 listed Romanian companies, using an inductive approach. Most companies report information on their materiality assessment process; direct, inside out, and positive impacts (and less financial materiality), environmental risks and opportunities, and social impacts. Companies engage mainly with stakeholders in the social realm and less with financial capital providers. The stakeholder engagement process is not continuous, relying predominantly on isolated events. Internal processes are implemented and overseen by dedicated governance structures. Further clarifications and stricter requirements on the implementation of the double materiality concept are needed for the effective application of the CSRD.

Employees’ perceptions on management policies and practices regarding human resources for economic efficiency in crisis period

In recent years, there has been a lack of attention to the connection between crisis management and the HR (human resources) department. However, many researchers emphasize the importance of the human resources department in crisis management. The main objective of the research is the analysis of employees' perceptions regarding measures to improve decision-making when considering the behavior of human capital in in terms of maximizing economic efficiency, as well as the analysis of human resources management through the lens of policies and practices intended for management in crisis period. The quantitative method was used to conduct a survey and the qualitative method was used through the interview. These methods were based on aspects developed in the specialized literature and adapted for this context. The results of the study show that human resources management is crucial in Romanian companies, both in a normal context and in critical situations, highlighting a strategic approach to the role of employees in organizational success.

Corporate governance and financial fraud occurrence – case study on Romanian companies

PurposeThe aim of this study is to approach the way in which corporate governance influences the occurrence of financial fraud, as expressed by the M-Beneish score. In order to get further into the topic, we have first computed a corporate governance score based on the comply-explain statement and then selected a few elements that are part of the corporate governance reporting: equilibrium of board members (EQUIL), independence of board members (INDEP), selection of the board members (NOM), remuneration policy (REM), audit committee (AUDIT) and the proportion of female directors on boards (GenF). They were tested, one by one, using the financial fraud score to see the way in which they interact.Design/methodology/approachThe study is conducted on a sample of 65 companies listed on the Bucharest Stock Exchange (BSE) for the 2016–2022 period. The data were processed using three-stage general least square [general least squares (GLS), with iteration, igls and option] with a common first-order panel-specific autocorrelation correction, so as to explain how a poor adoption of the corporate governance score and its elements has a negative implication for the M-Beneish score, controlling for the auditor opinion, type of auditing company and if the company is privately owned.FindingsThe results support most of our research hypothesis, revealing that a poor adoption of the corporate governance score and its components – AUDIT, EQUIL, INDEP and GenF – negatively influences the M-Beneish score, i.e. a low corporate governance score will lead to an increase in financial fraud. This is an encouraging aspect, for an improved adoption of the corporate governance principles reduces the occurrence of financial fraud.Research limitations/implicationsThis is a study that concerns the relationship between corporate governance and financial fraud for the case study for Romania.Practical implicationsThe study highlights the importance of adopting the corporate governance code applied to the Romanian business environment. By measuring the presence of financial fraud appearance through the M-Beneish score, we have managed to outline the negative relationship between the two components. Thus, it is an important aspect of which companies should take account, so they will have long-term benefits and ensure the continuity of the business.Social implicationsThe policy implications of this project are for policymakers, so that they will understand how a good corporate governance mechanism will enhance high-performing businesses. Different aspects regarding corporate governance were validated and are in the process of being validated. Managers can extract and try to understand and apply the good characteristics of corporate governance for the well-being of their companies. At a broader level, the macroeconomic environment will increase its own well-being while encouraging market players to enhance qualitative corporate governance reporting. There is no doubt that corporate governance has a positive impact on businesses.Originality/valueThe study highlights the importance of adopting the corporate governance code as applied to the Romanian business environment. By measuring the occurrence of financial fraud using the M-Beneish score, we have managed to outline the negative relationship between the two components. Therefore, this is an important aspect that companies should take into account in order to have long-term benefits and ensure the continuity of their business.

The Perceptions of Employees from Romanian Companies on Adoption of Artificial Intelligence in Recruitment and Selection Processes

The Perceptions of Employees from Romanian Companies on Adoption of Artificial Intelligence in Recruitment and Selection Processes

Evaluation of the Carbon Footprint of Wooden Glamping Structures by Life Cycle Assessment

Despite the increasing popularity of glamping structures, empirical studies often overlook the carbon impact of wood in these constructions, creating a significant research gap. Understanding the net carbon effect of wood in glamping structures is crucial for informing sustainable building practices. This paper aims to quantitatively compare the net carbon impact of wood in glamping structures, filling a notable gap in the current research literature. The investigation undertakes a thorough evaluation employing a life cycle methodology, appraising the emissions linked with the complete glamping life span. Seven Romanian companies are examined vertically within the glamping production chain and horizontally across the supply value chain. The investigation unveils a notable discovery: the integration of wood within glamping yields considerable carbon sequestration, wherein the wood employed sequesters 36.83 metric tons of CO2 per glamping unit. This surpasses the carbon emissions entailed throughout the entirety of the glamping life cycle, ranging from 9.97 to 11.72 metric tons of carbon. Remarkably, a single wood-incorporated glamping structure has the capacity to sequester approximately 25 metric tons of carbon within a span of 50 years. In summary, the investigation underscores the capacity of responsibly sourced timber to function as a carbon reservoir, proficiently counterbalancing emissions across the entirety of the construction life cycle. The findings underscore the importance of sustainably sourced wood in achieving carbon neutrality and provide valuable insights for promoting sustainable building practices. This methodology has broad applicability beyond glamping structures, holding potential for replication and scalability across various sectors and regions, thereby contributing to global efforts towards mitigating climate change and fostering positive environmental change.

Accounting and taxation in Romania: from connection to disconnection?

Research Question: What are the effects of the evolutions in tax and financial reporting regulations on the book-tax relationship in the case of Romanian listed companies; is the de jure trend towards a disconnection confirmed, and what findings can be made from a de facto analysis based on the effective tax rate (ETR)? Motivation: Istrate (2011) applied the grid proposed by Lamb et al. (1998) and found that, in 2020, the de jure trend was clearly towards a book-tax disconnection. My intention is to replicate this analysis for 2021 and to add some other variables that could characterize the period, in order to assess the 2021 de jure and de facto (dis)connection. Idea: Mandatory introduction of IFRS for some listed companies, adaptation of the Romanian accounting rules to the European directive 34/2013, modification of the tax rules, in particular as a result of European efforts to fight tax avoidance, unprecedented situations such as the covid-19 crisis were just as many reasons for companies to adapt their tax and financial reporting behaviours, which makes the more interesting the analysis of the book-tax relationship. Data: For the application of the analysis grid proposed by Lamb et. al (1998) and developed later by other authors, I have analysed the accounting and financial reporting regulations, in parallel with the treatments provided by the Romanian tax law. For the de facto analysis attempt, I analysed more than 3,800 observations about the Romanian companies listed on Bucharest Stock Exchange for the period 2000-2021. Tools: The assessment of the book-tax relationship was done by applying the Lamb et al. (1998) model, with the six possible cases: from total identity, to total disconnection. My analysis takes into account 40 key elements. In the case of de facto analysis, I calculated an ETR as the ratio between the current tax expense to profit before taxes. Findings and contributions: The study proposes a de jure analysis that confirms the evolution towards almost total disconnection between accounting and tax rules, especially for companies applying IFRS. The de facto analysis allows us to observe that ETR significantly different from the statutory tax rates (STR) – which confirms the disconnection between accounting and taxation. So, for the Romania listed companies, in general, the book-tax disconnection explains and justifies the differences between the ETR and the STR; in this case, the ETR is not really the best proxy for the tax avoidance, as many studies in the literature proposed.

The Nexus between Corporate Lyfe Cycle and Earnings Management at Companies Listed on the Bucharest Stock Exchange

This research investigates the nexus between the corporate life cycle (CLC) and accrual-based earnings management (AEM) and real earnings management (REM) practices. Companies listed on the main segment of the Bucharest Stock Exchange between 2007 and 2021 are analyzed through fixed effects and random effects models. The regression analysis uncovers that earnings management practices vary based on the developmental stage of the company. In the introduction stage, Romanian companies tend to prefer AEM techniques, while in the growth and maturity phases, REM practices are more prevalent. The conditions in which firms operate, the pressure from the capital market and the discretion over costs characteristic of each stage of development explain the preference for a certain method of earnings management. Overall, this investigation helps clarify CLC's role in adopting earnings management techniques (AEM/REM) and signals the need to pay particular attention to the quality of financial reporting of companies in the early stages of development. The findings hold significance for auditors, financial analysts, investors, lenders, and regulators alike.

The close connection between liquidity and profitability: analysis of the retail market

Purpose- Analyzing profitability and liquidity indicators are essential for healthy financial management. Liquidity refers to the extent to which a company can convert its assets into cash quickly and without significant loss of value while profitability refers to the extent to which a company generates profits and returns investments for its owners. An important dimension in the relationship between liquidity and profitability is time. A company may be liquid and profitable at one point in time, but this may not hold true over time. In addition to these things, the Romanian retail industry is an industry that contributes massively to the achievement of the GDP and is also an important employer, offering employment opportunities to a significant part of the population. The purpose of this study is to determine the relationship between liquidity indicators and the profitability of retail companies. Methodology- STATA software was used to model the data and estimate the results, using multiple linear regressions. Findings- The analysis reveals that shows that liquidity rates have a low impact on the profitability of Romanian companies in the retail trade industry. Conclusion- Based upon the analysis, it may be concluded that managers must establish more favorable policies regarding the credit granted by suppliers, which can lead to a decrease in the cash conversion cycle and implicitly to an increase in the profitability of retail companies. At the same time, the simple conclusion is to pay more attention to the company's liquidity, observing the direct relationships between liquidity rates and profitability in the sense of increasing the last one. Keywords: business economics, financial management, liquidity, market, profitability, retail JEL Codes: L21, L81, M21