Short-term Financial Performance Research Articles

Informal institution and corporate innovation: From the perspective of social trust

Purpose: This study examines how social trust, as an informal institution, creates a cooperative and honest atmosphere to improve managers’ willingness for firm innovation. This study also addresses that the informal system may substitute for the formal institutions in promoting corporate innovation. Design/methodology/approach: This study opts a sample of Chinese listed firms over the period of 2007–2014. We obtain the detailed patent application information from the official website of China Patent and Intellectual Property Office. The social trust information is based on the results of Chinese Enterprise Survey System. Findings: The results indicate that firms located in regions of high social trust tend to have more innovation output, and is robust to a battery of sensitivity tests. The authors further document that this effect is more pronounced for firms with poor short-term financial performance, which are located in regions with weak legal environments and firms having lower information transparency. In addition, the authors also demonstrate that social trust can help firms to get adequate funds to reduce financial pressure and encourage firms to pay more attention to long-term benefits, alleviating investors as well as management myopia. Research limitations/implications: Limited by the data sources, when measuring innovation activity, the authors only use patent numbers represent for innovation output. Then, this study measures the patent quality through classifying patent categories (invention patent or others), since in China, the citation data are imperfect and inadequate. Practical implications: The results suggest that social trust means a good culture of honesty and cooperation can promote firm’s innovation engagement. Especially, in emerging markets, where formal mechanisms are relatively less effective, informal institutions can serve as an alternative system for alleviating information asymmetry. Originality/value: This study contributes to the literature in two ways. First, this study finds the positive effect of social trust on corporate innovation, which provides a new perspective for deepening the understanding of the influence factors of innovation. Second, this study further clarifies the mechanism of social trust promoting firm innovation, indicating that social trust can effectively alleviate outsiders’ concern about moral hazard risk. Then the stakeholders are more willing to provide financial support and pay more attention to the firm’s long-term performance.

Advancing Strategic Management through Sustainable Finance

Abstract In a VUCA world dominated by volatility, uncertainty, complexity, and ambiguity as it is the case today, strategic management is redefined by the necessity to acquire strong organizational capabilities of agility and resilience, simultaneously with a prominent orientation toward adoption of measures destined to meet climate change and social challenges. The environmental, social, and governance (ESG) criteria are the new must when designing corporate programs, starting to be adopted by small and medium enterprises (SMEs) as well, but with different success rates. High-profile ESG programs tend to be launched and developed mainly by organizations that integrate them into evolving business models and strategies, thus translating gradually to sustainable strategic management frameworks. Nevertheless, to adopt sustainability in business requires concomitantly acquiring financial performance and having access to disposable financial capital. The paper explores the current challenges of sustainable strategic management in parallel with the academic discussions on shareholders’ value creation, investigating the relation with available sustainable investments’ practices. The long-term and short-term financial performance of sustainable business practices are investigated, as well as the orientation of professional investors regarding ESG programs, as presented in recent literature. The authors discuss the importance of knowledge in adopting sustainability in business, the organizational maturity in adopting sustainability in day-to-day activities, as well as the impact of regulatory stimulus and of financial performance on investing in ESG programs. Finally, the paper tackles the necessity to make available more financial resources alongside a gradual transformation of managerial mentalities oriented toward measurable and well-defined planned sustainable strategic management.

Do corporate social responsibility practices improve financial performance? A case study of airline companies

With the growing emphasis on corporate social responsibility (CSR) practices, airlines are beginning to question whether the implementation of CSR activities will increase costs or affect corporate financial performance. Some researchers argue that CSR is positively associated with corporate financial performance, while others oppose this view. This study tracked the environmental, social, and governance (ESG) performance indicators and the short-term financial performance of 30 airlines worldwide for five years with data from the Thomson Reuters Eikon ESG database. A multilevel quadratic growth model was used to investigate the impact of airlines’ disclosure of ESG performance indicators. The results revealed that in the initial stages of implementation of ESG-based practices, airlines demonstrate a downward trend in return on assets. However, it gradually increases after a period of incorporation and implementation. Based on this result, airlines should prioritize the selection of key performance indicators for the implementation of CSR toward sustainability.

Noteworthy diversity efforts and financial performance: Evidence from DiversityInc's top 50

This study provides evidence that diversity efforts are associated with improved organizational performance. We explore the benefits of diversity by analyzing long-term shareholder value (Tobin's q) and short-term performance (return on assets) of companies cited for being leaders in the area of diversity. Tobin's q is significantly higher for companies included on the DiversityInc Top 50 list than other companies, implying that diversity efforts increase long-term shareholder value. Companies on a DiversityInc list also have significantly better short-term financial performance, return on assets, than similar companies in their industry. We also conduct a Granger causation analysis, and the results are consistent with our interpretation that appearance on the DiversityInc list increases Tobin's q. Our study contributes to the literature by comparing companies notably recognized for diversity efforts to companies not recognized, and examining the long-term benefits of those efforts.

Creating Shared Value Through an Inclusive Development Lens: A Case Study of a CSV Strategy in Ghana’s Cocoa Sector

Despite the widespread popularity of the Creating Shared Value (CSV) discourse, its ‘business case’ and ‘win–win’ rhetoric remain problematic. This paper adds an inclusive development perspective to the debate, arguing that analysing CSV strategies through an inclusivity lens contributes to a better operationalisation of societal value; makes tensions and contradictions between economic and societal value explicit and uncovers processes of inclusion, exclusion and adverse inclusion. We illustrate this by analysing Nestlé’s CSV strategy in its cocoa supply chains in Ghana based on content analysis of company documents, interviews with value chain actors and stakeholders, and focus groups with farmers. We ask how Nestlé frames and implements its CSV discourse in practice and how this relates to the social, relational and environmental dimensions of inclusive development. Findings show how the company addresses inclusive development dimensions in its corporate discourse, practices and business operations, and what trade-offs it faces. We then unmask the inherent tension between business objectives and societal interests and explain why the scope, issues addressed and societal impacts of CSV remain constrained. We conclude that CSV can help reduce a company’s impact on some persistent societal issues, but that its contribution to transformational change remains limited because the need to uphold competitive advantages and short-term financial performance narrows its ability to address all inclusivity dimensions. Legislation mandating responsible business conduct and due diligence can reduce this inherent tension by levelling the playing field between companies addressing inclusivity issues vis-à-vis those who do not.

Graduate Medical Education in Otolaryngology: Making Dollars and Sense of Reform.

Graduate medical education (GME) is funded by the Centers for Medicare and Medicaid Services through both direct and indirect payments. In recent years, stakeholders have raised concerns about the growth of spending on GME and distribution of payment among hospitals. Key stakeholders have proposed reforms to reduce GME funding such as adjustments to statutory payment formulas and absolute caps on annual payments per resident. Otolaryngology departmental leadership should understand the potential effects of proposed reforms, which could have significant implications for the short-term financial performance and the long-term specialty workforce. Although some hospitals and departments may elect to reduce resident salaries or eliminate positions in the face of GME funding cuts, this approach overlooks the substantial Medicare revenue contributed by resident care and high cost of alternative labor sources. Commitment to resident training is necessary to align both the margin and mission of otolaryngology departments and their sponsoring hospitals.

FINANCIAL PERFORMANCE OF CEMENT COMPANIES IN INDIA – AN EMPERICAL STUDY

In the World, the second major manufacturer of cement is the India. No marvel, India's cement production is an essential part of its economy, given that employment to more than a million people, directly and indirectly. India has a lot of options for development in the transportation and infrastructure sector and the cement sector is expected to largely benefit from it. The objectives of the study are to find the short term financial performance of the sample cement companies and analyze the profitability condition of the chosen cement companies. It is based on the convenience sampling method. The information used in this study is secondary in nature. Profit earning is measured necessary for endurance of the industry. The Profitability ratios show the capability of the select companies. The financial positions of the selected cement companies are reasonable. But both the companies must improve their short term solvency position. The profitability ratio of two cement companies is satisfactory and the two selected companies’ short term liquidity position is not satisfactory because the selected company’s current ratio and Quick ratio level is below one and two selected companies are quickly maintained their inventory, investment and Debtors. Ultra Tech Cement Limited correlation between the Investment Turnover Ratio and Inventory Turnover Ratio is 1which is very strongest. The correlation between Debtor Turnover Ratio and the Net Profit Ratio is -0.972 which is very weak. Shree cement Limited correlation between the Investment Turnover Ratio and Debtor Turnover Ratio is 1 is very strong. The Investment Turnover Ratio and the Debt Equity Ratio are – 0.760 which is very weak. The competence of a compact depends ahead the functioning operations of the anxiety.

Do governmental subsidies improve the financial performance of China’s new energy power generation enterprises?

Supported by preferential policies and governmental funding, the development scale of China’s new energy power generation industry has been improved greatly.As a capital-intensive practice, what is the impact of governmental subsidies on the financial performance of China’s new energy power generation enterprises in recent years? Will technological innovation improve the financial performance of enterprises? These questions are of great significance to the government and enterprises. However, empirical researches on these issues are relatively less. Based on the data of 158 listed new energy power generation companies in China from the past decade, this paper measures the impact of governmental subsidies on financial performance at the microscopic level. In addition, the impact of technological innovation on financial performance is also evaluated. The research results show that: first, governmental subsidies have a negative impact on the short-term financial performance of new energy power generation enterprises, and have a positive impact on their long-term financial performance; second, the technological innovation subsidy has a single threshold effect on the short-term financial performance of new energy power generation enterprises; and third, there are differences between supportive subsidy and technological innovation subsidy on the financial performance of new energy power generation enterprises.

What misguides environmental risk perceptions in corporations? Explaining the failure of Vale to prevent the two largest mining disasters in Brazil

Corporate misperceptions of environmental risks are relatively frequent and can have catastrophic consequences, as in the case of the two recent tailings dam breaks in Brazil of the mining company Vale. By analysing Vale's documents and testimonies of investors, managers and engineers in the period between the two accidents (2015–2019), we investigated why Vale disregarded potentially disastrous operational risks after the largest tailings spill in the history of mining in Brazil. The results reveal that the sources of risk considered important at Vale were those that could potentially affect the company's short-term financial performance. Overall, these findings indicate that the focus on shareholder value can generate strong biases in the perception and assessment of environmental risks, which can not only cause massive social and environmental impacts, but also, paradoxically, the destruction of shareholder value in the long run.

Profits without subsidies?

Supported by preferential policies and governmental funding, the development scale of China’s new energy power generation industry has been improved greatly.As a capital-intensive practice, what is the impact of governmental subsidies on the financial performance of China’s new energy power generation enterprises in recent years? Will technological innovation improve the financial performance of enterprises? These questions are of great significance to the government and enterprises. However, empirical researches on these issues are relatively less. Based on the data of 158 listed new energy power generation companies in China from the past decade, this paper measures the impact of governmental subsidies on financial performance at the microscopic level. In addition, the impact of technological innovation on financial performance is also evaluated. The research results show that: first, governmental subsidies have a negative impact on the short-term financial performance of new energy power generation enterprises, and have a positive impact on their long-term financial performance; second, the technological innovation subsidy has a single threshold effect on the short-term financial performance of new energy power generation enterprises; and third, there are differences between supportive subsidy and technological innovation subsidy on the financial performance of new energy power generation enterprises.

Contradictory Voting by ESG Funds

This paper studies the conflict between ESG funds and their investors. Funds trade-off greater short-term financial performance against long-term sustainability. This conflict results in ESG funds voting against their stated pro-social mandate, even when supported by proxy advisors. Lower returns to sustainable proposals result in funds actively managing returns, while flow tests suggest that investors do not respond to contradictory voting. Simulating a correction to this voting pattern suggests an increase in passage of proposals, and greater sustainability disclosures. While investors delegate their pro-social preferences onto socially responsible funds, financial returns ultimately determine a funds' stance towards such issues.

이익조정과 단기 재무성과: 공공기관의 감사위원 및 기관장의 조절효과를 중심으로

공공기관은 가시적 성과향상을 위한 정치권의 압박과 공기업 자체의 내부적 유인이 결합하여 회계조작, 단기적인 보여주기식 기업운영 등의 가능성이 존재한다. 특히, 내부 거버넌스 주요 구성원인 기관장, 감사위원 등의 경력, 재임기간, 성과급 체계에 따라 이와 같은 단기적인 보여주기식 기업운영 유인이 더 강해질 수 있다. 감사위원과 공공기관장에 중점을 두고 실증분석한 결과 첫째, 감사위원은 상대적으로 외부에서 발견될 위험이 높은 발생액 이익조정(accrual earnings management)의 영향을 억제하는 억제자로서 기능하였다. 하지만 상대적으로 외부에서 발견될 위험이 낮은 실제 이익조정(real earnings management)의 영향은 감사위원이 억제하지 못하고 오히려 유의미하게 증가시켰다. 둘째, 기관장의 재임기간이 짧을수록, 기관장 퇴직 이후 정치 분야로 진출하는 경우(ex. 정치인)에 기관장은 재임기간동안 이익조정으로 단기 재무/회계성과를 높일 유인이 있음을 확인하였다. 본 연구의 분석결과는 첫째, 공공기관 감사위원의 성과급 구성 방식을 기관 및 기관장의 성과 구성방식과 구분해야 함을 시사한다. 둘째, 공공기관 기관장이 임용되면 재임기간을 보장해줄 필요가 있으며, 교체 시에도 정치적인 동기보다는 공공기관 경영실적평가 등 보다 객관적인 기준에 의해 교체될 필요가 있음을 보여준다. 셋째, 본 연구의 분석결과는 기관장의 퇴임 이후의 목표와 기대(expectation)에 따라 재임기간 동안의 기관운영방식이 달라질 수 있음을 보여준다. 특히, 기관장 퇴직 이후에 정치로 나가기 위해서는 기관운영 평판도 중요한 기준 중의 하나이기 때문에 단기적인 기관성과를 높일 유인이 있음을 시사한다.

Short-Term Debt and Financial Performance of Small and Medium Scale Enterprises in Buganda Region, Uganda

Short-term debt is regarded as an important source of financing for Small and Medium-sized enterprises (SMEs). This is because it can be easily accessed and useful during times of emergent working capital shortage. However, short-term debt is the least researched among the components of capital structure, which explains why its contribution to the financial performance of small and medium-sized businesses still lacks empirical validation especially in the Ugandan context. This paper sought to determine the effect of short-term debt on financial performance of Small and Medium Enterprises in Uganda. The study adopted a descriptive cross-sectional research design to collect and analyse the data. Stratified random sampling technique was used to select SMEs while purposive sampling technique was used to select one key respondent from each of the sampled 453 SMEs in Uganda. Primary data was collected using survey questionnaire. Data was analysed using descriptive statistics and simple linear regression analysis. The findings indicted that short-term debt had a negative and significant effect on financial performance of SMEs as measured by return on assets. The study provides empirical evidence to support the propositions in the extant literature that short-term debt significantly hampers financial performance of SMEs. The study recommends that SMEs should adopt low cost operation procedures to improve profitability. This would lead to accumulated profits that can be used for investment purposes as a means of driving growth among the SMEs without resorting to borrowing. This paper suggests that further research should be conducted to establish the justification for the negative and significant effect of short-term debt on financial performance using qualitative approaches.

Rethinking financial performance and corporate sustainability: Perspectives on resources and strategies

This research investigates the reasons behind the success and sustainability of century-old businesses and further explores their related antecedents. Based on the theories of resources and strategy perspectives, we examine the impact of human resources, business strategies, and financial performance on corporations’ sustainability from a sample of 3,587 Japanese-listed corporations from the OSIRIS database and use logistic regression analysis for testing the hypotheses. The empirical findings support that resources and strategy factors affect the sustainability of century-old Japanese firms, whereas short-term financial performance does not. This study offers a guide for enhancing human resource management and the strategic choice of diversification, instead of short-term financial performance, in order to assist century-old businesses at being sustainable.

Government Procurement and Firm Performance: The Role of Network Centrality

The U.S. government, as the world’s biggest buyer, can substantially impact private suppliers. Although important, government contracting is an understudied topic. This research bridges the gap in current literature by investigating the impact of U.S. government contracting on the short- and long-term financial performance of private suppliers. Juxtaposing agency theory, property rights theory and analyzing panel data collected from the Federal Procurement Data System, Factset Revere and Compustat, this research investigates the interplay of government contracts, firm network centralities, and financial performance of 2,834 firm-year observations (627 firms). The empirical analysis suggests that government contracting bolsters suppliers’ short-term financial performance (ROA), but negatively affects the long-term financial performance (Tobin’s Q). In addition, network quality, measured as eigenvector centrality, ameliorates the negative effect of government contracts on long-term performance. On the contrary, network quantity, measured as degree centrality, demonstrates a negative moderating effect.

The relationship between financial risk management and succession planning in family businesses

PurposeThis article examines the relationship between financial risk management and succession planning in family businesses. Motivated by the Theory of Planned Behaviour, we hypothesize that the use of professional risk management practices is associated with an increased likelihood that businesses adopt professionalized approaches to succession planning. We then investigate if succession planning professionalization is, in turn, positively related to the financial performance of family businesses.Design/methodology/approachWe apply binary probit and ordered dependent variable regressions to unique data generated from a survey sample of Australian family businesses. To check the robustness of our results to potential endogeneity concerns we apply difference tests to propensity score matched sub-samples from our original cohort of respondents.FindingsThe results show that, in contrast to verbal or absent succession arrangements, formal written succession plans are both positively associated with the use of financial risk management practices and with superior financial performance in family businesses.Originality/valueOur arguments and findings suggest that active financial risk management provides a platform for planning succession in family businesses, and that this links with improved short-term financial performance. In light of the critical role that succession plays in ensuring long-term business sustainability, our findings provide important and novel insights into the conditions under which family businesses are most likely to use formal professionalized succession planning.

Corporate Carbon and Financial Performance Revisited

To assess the robustness and sensitivity of the findings in Delmas, Nairn-Brich, and Lim, we conduct a replication and an extension study. In the replication, we use their research design but analyze another time frame. In our extension, we furthermore expand the geographical scope, and use another carbon performance measure as well as a different set of control variables. We show that the finding that higher carbon emissions are associated with higher short-term financial performance is very robust. By contrast, we also find strong evidence for higher carbon emissions being associated with higher long-term financial performance. This outcome is supported by several supplementary analyses and robustness checks. We derive theoretical implications for the debate on tackling grand challenges. Since there seem to be negative financial performance implications for firms reducing carbon emissions, we highlight a clear need for further policy intervention to pave the way for a low-carbon economy.

How entrepreneurs think: financial decisions for the long or short term

PurposeThe purpose of this paper is to suggest that different start-up motivations make entrepreneurs pursue different kinds of new business performance, which in this study are expressed in financial terms (i.e. return on assets). The authors posit that so-called extrinsic motivation urges entrepreneurs to be more short-term oriented, while their intrinsic motivation encourages a longer-term business vision. Additionally, this paper explores how intrinsic and extrinsic entrepreneurship motivations combine and produce financial dilemmas for entrepreneurs.Design/methodology/approachThe analyses are based on 300 entrepreneurs across diverse industries in Belgium. Data was collected for this study through structured interviews with entrepreneurs combined with a company questionnaire. Financial data was obtained through a government database.FindingsResults confirm that extrinsic entrepreneurship motivation boosts new business short-term financial performance, whereas intrinsic motivation contributes to the firm’s longer-term financial returns. This paper also shows that a mix of intrinsic and extrinsic motivations directs entrepreneurs toward different profitability levels during the organization’s survival and early-establishment phase.Originality/valueResearch on entrepreneurship has not yet corroborated that motivations can be personally conflicting, thereby saddling the entrepreneur with dilemmas that may manifest into different levels of business performance.

Going Green Inside and Out: Corporate Environmental Responsibility and Financial Performance under Regulatory Stringency

While researchers have long examined the relationship between corporate environmental responsibility (CER) and financial performance, the evidence remains inconclusive. Moreover, whether sustainable supply chain management plays a role in enhancing the financial performance of focal firms has yet to be fully investigated. As firms’ investment in CER often pays off in the long-term, applying multiple time horizons, short- to long-term considerations, is needed to determine the effects of CER. This study examined the role of CER in improving financial performance based on multiple time horizons. In particular, the effects of CER on financial performance were explored in terms of internal operations and supply chains. The moderating effects of regulatory stringency on the relationship between CER and a firm’s short- or long-term financial performance were also investigated. Firms’ CER was studied using carbon data from Trucost. Carbon footprint can be an appropriate proxy for CER, as it provides information on supply partners’ environmental concerns. A unique dataset of the carbon footprint of 714 North American firms in 19 industry sectors in 2003–2010 was used. The results indicated that firms benefit from CER not only in their internal operations but also in their supply chains in both the short and long-terms. The moderating effects of regulatory stringency were significant for CER only in terms of the supply chain but not for internal operations. In industries with a high level of regulatory stringency, the positive effects of CER on short-term financial performance in the supply chain become weaker, but the same effects on long-term financial performance become stronger. By investigating the effects of two distinct carbon footprint aspects on financial performance at different time horizons, this study sheds light on the importance of CER in firms’ internal operations and supply chains.

Interpersonal and IT-enabled communication in platform transactions: the contingent role of contract completeness and technology usage

PurposeThis paper assesses whether communication via interpersonal and IT channels accounts for short-term financial performance and long-term orientation and how these effects are influenced by contract completeness and technology usage in platform builder-platform participant relationships.Design/methodology/approachThe conceptual model and hypotheses are validated through a moderated regression of 384 survey responses from platform participant.FindingsThe empirical results indicate that interpersonal and IT-enabled communication contribute to both short-term financial gains and long-term orientation. The coexistence of interpersonal communication and IT-enabled communication has a synergetic effect on long-term orientation. Contract completeness positively moderates the effect of interpersonal communication on short-term performance while negatively moderating its effect on long-term orientation. Furthermore, contract completeness undermines the effect of IT-enabled communication on short-term performance. Technology usage enhances the effectiveness of interpersonal communication in generating long-term orientation.Originality/valueFirst, diverging from the extant research treating communication as a single dimension construct, this study differentiates communication on media channels and shows their separate and synergetic effects on short-term performance and long-term orientation. Second, our empirical findings indicate that the effects of communication are influenced by governance practices, which extends the communication literature. Third, previous studies have presented conflicting results concerning the role of governance mechanisms in inter-firm relationships. By showing that governance mechanisms also either support or suppress communication in generating performance for platform participants, this study extends the existing research on governance mechanisms. Finally, by regarding technology usage as a transactional governance mechanism, this study furthers our understanding of the role of technology in interfirm relationships.