Short-term Financial Performance Research Articles

The influence of intelligent manufacturing on financial performance and innovation performance: the case of China

ABSTRACT Artificial intelligence is increasingly used in advanced manufacturing systems to realise intelligent manufacturing. However, there is still a lack of empirical research on the impact of intelligent manufacturing on enterprise performances, especially for China. The author adopts the enterprise panel data of intelligent manufacturing implemented by China’s manufacturing industry in 2014 to 2019, and uses propensity score matching with difference in differences (PSM-DID) method to investigate the impact of intelligent manufacturing on financial performance and innovation performance. The research yields two main conclusions. First, the implementation of intelligent manufacturing has a significant role in promoting the financial performance and innovation performance of manufacturing enterprises. Second, technology-intensive industries improve the quantity of innovation by implementing intelligent manufacturing, thus promoting the improvement of short-term financial performance, but the improvement of innovation quality has a negative impact on short-term financial performance. In labour-intensive industries, the relationship between financial performance and innovation performance is not obvious.

The effect of digital transformation strategy on performance

PurposeThe purpose of this study is to verify whether digital transformation strategy (DTS) could improve the organizational performance and provide a comprehensive analysis for enterprises on the necessity of implementing digital transformation in the context of China and draw on the perspectives of “Skewed conflict,” “minority dissent theory” and “too-much-of-a-good-thing.” This study investigates the curvilinear moderating role of cognitive conflict between DTS and performance.Design/methodology/approachAn empirical investigation was used to collect a large sample data of Chinese enterprises’ digital transformation. A multiple linear regression analysis with SPSS was used to test the proposed hypotheses such as the inverted U-shaped moderating effect of the cognitive conflict.FindingsIn the Chinese context, DTS has a positive relationship on the short- and long-term financial performance. Moreover, this relationship was moderated by cognitive conflict such that the relationship between DTS and short-term financial performance could be further enhanced under the moderate cognitive conflict; however, the relationship between DTS and long-term financial performance was considerably influenced for higher cognitive conflict.Originality/valueBased on the co-evolution of the information technology/information system (IT/IS) and business strategy, this study clarified the relationships among DTS, digital strategy and business and information technology strategies. By focusing on corporate strategy, this study further examined the effect of digital transformation on both short- and long-term financial performance. To further reveal the micro-psychological mechanisms underlying the effect of DTS on organizational performance, this study confirmed the inverted U-shaped moderating effect of the top management team’s cognitive conflict. Therefore, this research provides a new theoretical perspective for future research in the field of IT/IS, DTS and digital strategy.

Nonfinancial Performance Measures and Risk Taking: Evidence from the Oil and Gas Industry

This study examines the relation between nonfinancial performance measures (NFPMs) and firms’ risk taking. Specifically, using CEO compensation contracts in the oil and gas industry (SIC 1311), I examine the relation between NFPMs and firms’ exploration and exploitation activities. The oil and gas industry provides an ideal setting for my study because firms in this industry are required to disclose their exploration and exploitation activities, which allows me to develop empirical measures for both activities. I find NFPMs that incentivize high risk exploration activities (exploration NFPM) lead to more investment in exploration activities. More importantly, I find that firms with exploration NFPMs also invest in more low risk exploitation activities and achieve better short-term financial performance compared to other firms. These results are consistent with my hypothesis that explicit incentives to invest in risky projects induce risk averse managers to manage the associated downside risk of failure by allocating resources more efficiently across other projects. My findings shed light on how NFPMs can potentially complement equity-based incentives and financial accounting measures to direct and motivate managers to take on risky projects as well as better manage firm performance.

Analysis of Short Term Financial Performance: A Case Study of an Energy Service Provider

Objective – This study aims to analyze the short-term financial performance of an energy service company, and compared to companies in the oil and gas mining sub-sector. The results of this study indicate the profit and loss, asset management, and profitability of the company in the last 5 years. Design/methodology – The method used is descriptive method and quantitative method. The period of analysis of financial statement data is 2013-2017. This study uses (1) trend analysis to see a comprehensive picture of the company (2) financial ratio analysis to see company performance (3) comparative analysis comparing company financial statements with similar industries (4) SWOT analysis to determine strengths, weaknesses, opportunities, and threats and strategies needed by the company. Results – The Cost of Goods per Sales ratio tends to decrease, so sales decline. The company's EBIT trends are relatively smaller than the industry average. This reflects that the sampled company has not maximized the company's EBIT. The company has tried to maximize gross profit and with good asset management will have an impact on increasing profitability in the future.

Customer satisfaction underappreciation: The relation of customer satisfaction to CEO compensation

Customer satisfaction contributes to firm financial performance, but does it contribute to top executives' pay? Our empirical evidence shows that it may not. Customer-satisfying executives tend to have lower pay than their productive peers, even if both satisfaction and productivity contribute to firm financial performance. Thus, customer satisfaction is underappreciated, which may result in both less societal welfare and worse company performance. We propose a board myopia mechanism to account for this phenomenon. In facing short-term financial performance pressure from investors, and the asymmetric information availability between accounting-based and market-based assets for compensation decisions, the board of directors may be myopic, underappreciating executives who invest in market-based assets such as customer satisfaction that drive long-term returns. We examine this satisfaction underappreciation phenomenon empirically using 23 years of panel data that detail firm productivity, customer satisfaction, firm financial performance, and executive compensation. The longitudinal data are analyzed using fixed-effect panel models and a simultaneous system of panel vector autoregression equations with interactions to assess the direct effect of firm financial performance and its carryover effect to executive compensation across executives who are productive, customer-satisfying, or both. The results confirm that customer-satisfying executives are underappreciated: being productive is financially rewarding for both firms and executives, while being customer-satisfying is financially rewarding for firms but not as much for executives. We further demonstrate that using total shareholder returns to benchmark firm financial performance and reward executives with a higher proportion of stock compensation can encourage a long-term focus that alleviates this customer underappreciation.

Relationship between Working Capital Management Efficiency and Long-Term Financial Performance

In corporate financial management, short-term financial performance involving collection and conversion of assets (assets and rights) into cash in order to meet short-term financial obligations, termed as liquidity, is of key importance for the balance and short-term financial health, as well as for attaining long-term financial performance (profitability and return). The purpose of this article is to analyze the existing correlation between liquidity, stemming from the Current Liquidity Ratio - CLR and Net Profit Margin – NPM (profitability) and Return on Assets - ROA (return). Indicators from seven fiscal years were analyzed during the economic crisis period (2011 to 2017) of twelve Brazilian publicly-traded companies, of three different sectors, with shares negotiated on the BM & FBovespa. Analyzes were performed in two phases, the first being a graphical analysis of the CLR, NPM and ROA indicators and the trends throughout the period under analysis. During the second phase a correlation analysis was performed – Spearman correlation coefficient – with the use of the SPSS software. The results obtained indicate a correlation between the liquidity, profitability and return indicators.

HOW FEASIBLE A CONVERTIBLE IJARAH CONTRACT FOR SME’S FINANCING: A SIMULATION APPROACH

Islamic financial institutions have relied for decades on margin-based contracts toprovide financing for the business sector, despite the basic idea that Islamic financeis expected to provide an equity-based or a profit and loss sharing (PLS) contract.This fact raises the need to encourage the use of a margin-based instrument with aninnovative scheme that allows for conversion of the contract into a PLS-based contract.Moreover, we propose a convertible ijarah contract to fill this need. A convertible ijarahcontract is an ijarah (rent) contract that is convertible to a PLS contract according tothe Islamic financier’s decision. In this study, we simulate three scenarios of projectfinancing with (a) murabaha as a margin-based contract, (b) musharaka as a PLScontract and (c) a convertible ijarah contract. The aim is to evaluate whether theconvertible ijarah contract will provide a higher return for the financier compared to theother contracts. The main input of the simulation is nine sectors of Indonesian SMEs’financial performance. We found that when the financial performance of IndonesianSMEs was measured by short-term financial performance, the convertible ijarahcontract outperformed the murabaha contract for all sectors but did not outperformthe musharaka contract, except for low-margin sectors. However, when the financialperformance of Indonesians SMEs was measured by long-term economic performance,we found that the convertible ijarah contract outperformed the murabaha contract andmusharaka contract for almost all sectors.

Affordable Homeownership: An Evaluation of the Near-Term Effects of Shared Equity Programs

ABSTRACTWe estimate the effect of nine shared equity programs on the short-term financial health and loan performance outcomes of participating households. Using both difference-in-difference and propensity score matching approaches, we compare the outcomes of shared equity home purchasers with the outcomes of other similar first-time home buyers in their metropolitan regions. We find that shared equity purchasers have, on average, significantly less mortgage debt and pay less on their credit accounts each month than other similar purchasers, and they are appreciably less likely to have a home equity line of credit. They also perform just as well on their mortgages as nonshared equity purchasers do, as defined by having any 90- to 180-day mortgage delinquencies. Finally, shared equity purchasers do not show appreciable differences in nonmortgage financial health measures compared with similar borrowers.

The Formation and Effects of Exploitative Dynamic Capabilities and Explorative Dynamic Capabilities: An Empirical Study

Although previous studies have explored the formation and effects of dynamic capabilities, much remains to be learned on this topic. There has been little research on the formation and effects of exploitative dynamic capabilities and explorative dynamic capabilities. This paper provides an explanation of how entrepreneurial leadership style and slack resources affect the formation of exploitive dynamic capabilities and explorative dynamic capabilities and evaluates the effects of exploitive dynamic capabilities and explorative dynamic capabilities on competitive advantage. Based on a sample of 382 Chinese firms, the empirical results show that a transactional leadership style and absorbed slack resources can encourage the formation of exploitative dynamic capabilities, and that a transformational leadership style and unabsorbed slack resources are conducive to the development of explorative dynamic capabilities. Furthermore, exploitative dynamic capabilities and explorative dynamic capabilities can reinforce and complement each other. Exploitative dynamic capabilities positively impact explorative dynamic capabilities, and explorative dynamic capabilities enhance exploitative dynamic capabilities. In particular, exploitative dynamic capabilities have an important effect on short-term financial performance, and explorative dynamic capabilities lead to a significant long-term competitive advantage. The results show that explorative dynamic capabilities surpass exploitative dynamic capabilities in terms of competitive advantage, even if both have a positive influence on competitive advantage. This study validates and develops the theory of dynamic capabilities.

Effects of initial public offerings on economic performance of small and medium-sized enterprises

This study investigates the effects of the initial public offerings (I.P.O.s) of small and medium-sized enterprises (S.M.E.s) and their efforts to cooperate with large conglomerates on S.M.E.s’ economic performance and job creation. This study conducted a series of analyses of variance with a 2 × 2 between-subject design (I.P.O.s and cooperation with large conglomerates) and multiple regression analyses for credit ratings using 4419 and 3919 samples, respectively, of S.M.E.s from the Korea Innovation Survey. The results showed that I.P.O.s and cooperation with large conglomerates are positively associated with S.M.E.s’ job creation as well as multiple economic outcomes. Moreover, several scholars have argued that more accurate credit rating criteria should be proposed to evaluate the potential values of S.M.E.s because the current criteria mainly focus on their short-term financial and economic performance. Based on the results of the multiple regression analyses, this study found that I.P.O.s have a negative effect on S.M.E.s’ credit ratings, whereas cooperation with large conglomerates and job creation have no effect and the growth rates of net income and current assets have a positive effect.

Research on M&A Performance of Environmental Protection Enterprises under “One Belt and One Road”

Under the “The Belt and Road”, M&A has become the first choice for environmental protection companies to expand their business scope and enhance their competitiveness to win more PPP projects. This paper takes the Yongqing environmental protection merger and acquisition of Xiangyin Garden as an example, adopts factor analysis method to study the financial data of the company before and after the merger and acquisition, and analyzes the impact of this merger and acquisition on the environmental protection financial performance of Yongqing. The study finds that after the merger and acquisition, the financial performance of the company presents a fluctuating state. In addition to the decline in solvency, the profitability, operating capacity, and development ability have improved well in the first quarter of the M&A announcement and one year after the acquisition. Overall, it has played a certain role in improving the short-term financial performance of Yongqing Environmental Protection.

Balancing Internal and External R&D Strategies to Improve Innovation and Financial Performance

Abstract This research investigated the complementarity of internal and external R&D for innovation development and the effect of innovation on the financial performance of European manufacturing firms. Using multigroup structural equation modeling, this study partially supported that internal and external R&D are complementary in firms from high-technology industries, whereas they are not in firms from low-technology industries. For the two groups of firms, both internal and external R&D separately had a positive effect on innovation performance. These results suggested that if low-tech firms, which had lower absorptive capacity than high-tech firms, want to improve their innovation performance in the long term, they should start prioritizing internal R&D to improve their absorptive capacity while achieving a short-term satisfactory innovation outcome. As absorptive capacity rises, more complex strategies balancing internal and external R&D should be adopted. Contrary to expectations, the empirical analysis indicated that innovation performance did not influence short-term financial performance for the whole sample. However, in countries more affected by the 2008 crisis (for instance, Baltic countries, Portugal and Spain), this effect was detected, indicating that innovation helped firms to recover faster.

A rational asymmetric reaction to news: evidence from English football clubs

Using a large dataset of matches played between two publicly traded English football (soccer) clubs, we test for and confirm an asymmetric market reaction to winning and losing and that the stock market respond stronger and slower to bad news (losing) than good news (winning). In contrast to previous studies, we show that financial fundamentals help explain this asymmetry. In particular, club short-term financial performance is negatively impacted by losing but not impacted by winning. Furthermore, losing is a significantly stronger predictor of future match outcomes than winning.

FARM OWNERS’ INTERVENTIONS DURING ECONOMIC CRISIS

This paper covers the issue of the effect of the economic crisis on farms organization. Research was conducted in the south of Poland, of which a certain portion has been presented to demonstrate the interventions undertaken by farm owners in light of the deteriorating economic situation. The research indicates that the choice of strategy for surviving the crisis, which shows in deteriorating management conditions, was determined by the farm type. Nevertheless, the most common decisions were about lowering consumption of current production assets and reducing capital-intensive investments. The spectrum of intervention measures undertaken by respondents in periods of economic crisis was therefore based mainly on temporary yet significant reduction of production costs in order to improve (or safeguard) short-term financial performance of a farm.

HRM and Employee Engagement Link: Mediating Role of Employee Well-being

The debate concerning the link between human resource management (HRM) and employee level as well as organizational outcomes has reached an interesting crossroads. While studies continue to demonstrate a relationship between financial success and the organization’s commitment to management practices that support people’s goals and treat people as assets, yet in reality, the focus on achieving short-term financial performance has obscured the consideration of people-oriented goals. Given the centrality of HRM practices to organizational success, this study reports the results of a survey conducted among 626 knowledge professionals working in IT companies in Chennai city of the Indian state of Tamil Nadu. The study found statistically significant relationship between HRM practices and employee-level outcomes such as perceived efficacy, engagement and employee well-being, where employee well-being plays a mediating role. The implications of the findings of the theory and practice of HRM have been discussed.

Toomer's Energy Drinks: Fueling Earnings Management?

ABSTRACTCompanies around the world commonly engage in earnings management. Some earnings management techniques comply with U.S. GAAP and do not violate financial reporting standards (e.g., real earnings management techniques such as postponing research and development expenditures), other techniques clearly cross the line (e.g., misclassifying repair and maintenance expenses as capital expenditures), and some fall into a gray area (e.g., adjusting the allowance for bad debt). This case exposes students to an ethical dilemma that involves earnings management: toward the end of its fiscal year, the executive management team at Toomer's Energy Drinks' European division realize that they will fall just short of a short-term financial performance target, and consider ways in which they can manage earnings to generate sufficient performance to meet the target. The case exposes students to ways in which companies manage earnings, and encourages students to think critically about the extent to which these techniques are ethical by requiring them to apply the IMA's Statement of Ethical Professional Practice and the AICPA's Code of Professional Conduct to a realistic scenario.

A Linkage Model of Supply Chain Operation and Financial Performance for Economic Sustainability of Firm

Although several studies have explored the relationship between the operation and performance of a supply chain (SC), a general SC model cannot deliver the expected financial results at a company-wide level. In this paper, we argue that this cannot guarantee the maximization of a firm’s overall value because short-term financial performance metrics do not reflect the risk to businesses and the invested capital. Owing to the varying natures of risk and the capital invested, firms with multiple divisions should assess each division separately, and the results can be compared for decisions concerning the allocation of the firm’s capital and resources to maximize the overall value of its businesses. We propose a linkage model to consider operational activities and financial performance simultaneously in a firm’s supply chain model. To exhibit the superiority of the proposed model that connects SC operation and financial indicators, we first compare the differences between models for maximizing profit and enterprise-wise economic value added (EVA) as objective functions. To examine uncertainty in the operational and financial parameters of the SC, the results of sensitivity analyses are then reported. Experimental results showed that our model, using the EVA approach, is more effective and superior in terms of maximizing the firm’s overall value from the long-term perspective while satisfying the target values for financial ratios set by the firm’s executives and shareholders for all periods, unlike the results of the general model.

Sustainable energy systems and company performance: Does the implementation of sustainable energy systems improve companies’ financial performance?

The main aim of this paper is to analyse whether the adoption of sustainable energy systems improves corporate financial performance. To this end, we obtained data from a sample of 574 multinational companies from 36 countries in the 2008–2013 period. On this data we implement a dynamic system panel data method. Our findings show that the adoption of sustainable energy systems allows firms to improve their short-term corporate financial performance while not leading them to reduce their corporate financial performance in the long term. Specifically, our results indicate that an increase in energy efficiency and the use of renewable energy sources do not significantly affect corporate financial performance. Neither does the integration of energy efficiency systems and renewable energy sources have any significant influence on corporate financial performance, while the level of implementation of sustainable energy management systems has a significant effect on short-term, but not long-term, corporate financial performance. Furthermore, other control variables, such as research and development expenditure and year, are also relevant in explaining firms’ financial performance. The adoption of sustainable energy systems helps to improve corporate financial performance in the short-term but has no affect in the long-term. This might be because the monitoring of energy efficiency using key performance indicators allows firms to detect and correct failures in the production process and hence improve short-term financial performance. However, this measure does not generate competitive advantages for firms and therefore has no effect on long-term corporate financial performance. From a scientific perspective of energy, this paper contributes to the literature by providing a detailed explanation of how the adoption of sustainable energy systems proposed by Peura (2013) influences corporate financial performance on the basis of new empirical evidence. These explanations provide a strong rationale for improving the efficient use of energy and harvesting low hanging fruits in the short term from a managerial perspective. Policymakers should encourage firms to align sustainable energy systems with their core business strategy by developing green technologies that allow them to acquire rare and valuable capabilities and abilities, which generate competitive advantage, and therefore allow firms to increase their long-term corporate financial performance.

Corporate social responsibility (CSR) and corporate diversification: do diversified production firms invest more in CSR?

ABSTRACTA diversification strategy increases the range of stakeholder demands and social issues related to a firm’s operation. Examining the consequence of production diversification strategy at a broader level, not only (short-term) financial performance but also long-term performance, as proxied by corporate social responsibility (CSR), is surprising. We show that a firm’s production diversification is associated with stronger engagement in CSR, particularly for unrelated diversification. And the higher level of diversification is, the more investment in CSR. Our findings lead to the interesting questions regarding diversification discount and the value of unrelated diversification, which has often been criticized because of its negative impact on short-term financial performance.

Does Direct-care Staffing Impact Nursing Home Outcomes? A Systematic Review

The empirical evidence on the relationship between nurse staffing levels and quality in US nursing homes was reviewed. Studies were assessed using a newly developed 21-item qual- ity framework. The findings were systematically collected and stratified by nurse type. Most evidence identified was on highly educated registered nurses. According to our re- view, less qualified staff cannot be claimed to improve quality. Nursing home managers contemplating switching from highly to less educated staff to improve short-term financial performance should consider that this negatively impacts quality outcomes and therefore long-term business opportunities. Evidence on this relationship in the European environ- ment would be desirable, especially in the context of currently discussed health workforce policy harmonization efforts or health workforce qualification initiatives.