Sustainability Financial Performance Research Articles

Capital structure, market conditions and financial performance of small and medium enterprises in Buganda Region, Uganda

Small and Medium Scale Enterprises (SMEs) continue to be major players in the economic growth of Uganda as well as many of the emerging economies. The Uganda Investment Authority had projected 5.5% economic growth by 2030 in anticipation of stable market conditions necessary for the sustained financial performance of SMEs. However, the business failure rate of SMEs in Uganda had persistently revolved around 70% in 2018 from 50% in 2004. This problem had been linked to the turbulent market conditions characterized by intensive competition as well as volatile consumption behavior of the customers. Empirical literature indicates that competitive intensity, as well as volatile customer demand, presents a negative impact on financial performance. Hence, the study sought to determine the moderating effect of market conditions on the capital structure-financial performance relationship of SMEs in Uganda. From a population of 218,561 SMEs, a sample of 453 respondents was selected out of which, 423 responded to the questionnaire. Primary data were analyzed using descriptive statistics and multiple regression techniques. The hypothesis was tested at a 0.05 level of significance. Findings indicated that Market conditions had a positive and significant moderating effect on the capital structure-financial performance relationship (?= 0.175 and p = -0.027). We conclude that market conditions can strengthen/ weaken the effect of capital structure on the financial performance of SMEs. We recommend that SMEs should evaluate the market conditions during the process of deciding the financing mix for their operations to optimize the impact of capital structure on financial performance

A comparison between PSAK 71 and PSAK 55 in the banking industry

Economic activities ascending from the use of PSAK 55 (Statement of Financial Accounting Standards) are alleged to be the cause of the Indonesian bank system instability when facing the global financial crisis in 2008. PSAK 55 results in CKPN (allowance for impairment losses) allocation on a procyclical nature. Therefore, it is expected that PSAK 71 implementation avoids procyclical CKPN that does not reflect sustainable financial performance. The current study is conducted to test the effectiveness of PSAK 71 implementation in hindering procyclical and credit crunch mitigation. The study’s population is the banking industry listed on the Indonesian Stock Exchange from 2008 to 2020. The data are then descriptively analyzed using descriptive analysis and the Wilcoxon Rank Test. The findings show that: 1) there is a significant difference in CKPN between PSAK 55 and PSAK 71 implementations, with no significant difference in the CAR and profit values, 2) there is no significant difference in the CKPN value applied based on PSAK 71 before and after entering the COVID-19 pandemic, and 3) there are significant differences in credit disbursement during the 2008 crisis and the 2020 crisis due to the COVID-19 pandemic.

Sustainable business Islamic banks in Indonesia

The purpose of this study is to create a sustainable business model of Islamic banks in Indonesia through financial and non-financial aspects with financial performance as a mediate variable. The study uses quantitative approach by collecting secondary data of Islamic Banks from financial statements and annual reports over the period 2010-2018. The population of this study is 9 (nine) Islamic banks and the sample of research uses the census method. Data processing methods uses Partial Least Square. The results of the study stated that corporate governance has a significant effect on financial performance, intellectual capital has a significant effect on financial performance and company size has a significant effect on financial performance, but corporate governance has no effect on sustainable business. In addition, intellectual capital has a significant effect on sustainable business but company size has no effect on sustainable business. Moreover, financial performance has a significant effect on sustainable business, financial performance mediated the effect of corporate governance on sustainable business, financial performance partially mediated the effect of intellectual capital on sustainable business and financial performance mediated the effect of company size on sustainable business.

Did Diversified and Less Risky Banks Perform Better Amid the Pandemic?

This study thrives on the Covid-19 induced economic burden to examine the effects of income diversification and credit risk on bank performance. The results suggest that amid tightened credit conditions and deteriorating asset quality due to the pandemic induced economic hardships, rising credit risk adversely affected bank performance. However, income diversification is positively related to bank performance and offers alternative means of enhancing sustainable financial performance amid the ongoing pandemic.

Analysis of the relationship between intellectual capital and firm performance: an empirical research on Borsa Istanbul

Purpose- The purpose of this research is to reveal the effect of firms' intellectual capital on financial performance. Firms invest in intangible assets as well as tangible assets in order to gain competitive advantage (Atan ve Tuncer, 2019). Within the scope of intangible fixed assets, the most investment is made to intellectual capital. Intellectual capital has three basic dimensions: human capital, structural capital and customer capital (Soylu, 2020). In the 21st century, where technology changes and develops very rapidly, companies create added value by using their intellectual capital and turn the added value into profit. In this respect, intellectual capital is knowledge that can turn into profit (Cetin, 2005). Methodology- The intellectual capital levels of companies operating in the Borsa Istanbul Industrial Index were measured by the Intellectual Value Added Coefficient (VAIC) method for the period of 2015-2019. The relationship between the obtained coefficient and financial performance indicators, return on assets ratio (ROA), return on equity (ROE) and Tobin's Q ratio, was analyzed by panel data method. Findings- According to the results of the research, there is a statistically significant and positive relationship between the intellectual capital coefficient and profitability rates and Tobin's Q ratio. Conclusion- The results obtained show the positive effect of intellectual capital on firm performance. Companies can focus on intellectual capital investments and increase their productivity for sustainable financial performance.

Does Firm Life Cycle Impact Corporate Investment Efficiency?

Corporate investment efficiency (CIE) is an imperative factor influencing the smooth functioning and financial sustainability of an enterprise. The role of a firm life cycle on risk and performance fundamentals has been extensively explored in the literature. However, it remains unclear as to whether the life cycle stages of a firm have any impact on corporate investment efficiency. This paper investigates the role of firm life cycle stages (FLCS) in determining the investment efficiency of 351 Pakistani non-financial listed firms over the course of 12 years (2005–2016). It used panel data fixed effects and ordinary least squares (OLS) techniques to empirically examine the proposed relationship. By employing Dickinson’s FLCS measure, we found that CIE was lower during the introduction and decline stages and higher at the growth and maturity stages of a firm’s life cycle. Moreover, the results of regression analysis revealed that mature firms enjoyed the highest level of investment efficiency followed by the growth firms. Overall, CIE exhibited an inverted U-shaped trend across FLCS. In addition, the findings corroborated the idea that the sample firms could not sustain their investment efficiency when they moved along different stages of the life cycle. Thus, policymakers are suggested to customize their investment policies for each stage of FLC to attain sustainable financial performance throughout the life of a firm.

Accountability via social and financial performance of the hospitality sector: the role of market orientation

PurposeThis study aims to examine the three dimensions of market orientation, namely, customer orientation, competitor orientation and inter-function coordination, which influence the accountability in the financial and social performance of tourism operators in large touristic cities.Design/methodology/approachIn total, 95 usable questionnaires as the required data were collected from the top managers of four- and five-star hotels in Iran.FindingsPartial least squares (PLS) results confirm that customer orientation and inter-function coordination influence both the financial and social performance of the hospitality sector yet reveal that competitor orientation has no significant relationship with social performance.Research limitations/implicationsThese findings not only highlight the compatibility of PLS with various forms of statistical analyzes but also furthers the current understanding of hospitality networks in megacity economies, where literature are scarce.Practical implicationsThe findings of this study can help policymakers, tourism associations and practitioners enhance the accountability and sustainable financial and social performance of the hospitality industry in megacities. This study proposes some unique measurements for the social and financial performance of the hospitality sectors.Originality/valueThe paper states some new measurements for the social performance of the hospitality sectors. In addition, measuring the impacts of market orientation on the financial and social aspects of hotels is totally unique.

CONTROL ENVIRONMENT AND FINANCIAL PERFORMANCE OF SAVINGS AND CREDIT COOPERATIVES (SACCOs) IN MID-WESTERN UGANDA

Purpose: To establish the relationship between control environment and financial performance of SACCOs in Mid-Western Uganda.Methodology: A cross-sectional research design and positivist paradigm were used to collect data from 93 SACCOs in Mid-Western Uganda. A closed-ended questionnaire was used to collect data. Correlation and standard linear regression analyses were conducted.Findings: The study findings reveal a strong, positive and significant relationship between control environment and financial performance of SACCOs in Mid-Western Uganda.Unique contribution to practice and policy: This study emphasizes the need for top management to emphasize the importance of designing and implementing effective and efficient control environment. In addition, the government of Uganda needs to review its strategies that are geared at ensuring that SACCOs achieve sustainable financial performance

Sustainability Reporting and Financial Performance of Deposit Money Banks in Nigeria

This study examines how sustainability reporting is useful for assessing the financial performance of listed Deposit Money Banks in Nigeria. Specifically, the study focuses on the economic, environmental and social dimensions of sustainability reporting using “Return on Assets”, “Return on Equity” and “Earnings per Share” as proxies for financial performance of Deposit Money Banks in Nigeria from 2012 to 2018. The sample of the study was restricted to seventeen deposit money banks out of twenty one Banks quoted on the Nigerian Stock Exchange as at December, 2018. The required data were collected from audited annual financial statements and “sustainability reports” of the selected Deposit Money Banks for the period. A detailed analysis of the three bottom lines of profit (economic), people (social) and planet (environmental) impact was conducted. The descriptive and least squares regression analysis were adopted for the study considering the banks’ sustainability reporting practices against the selected performance proxies. The study concludes that sustainability reporting practices of Banks in Nigeria have substantial impacts on the financial performances of Deposit Money Banks in Nigeria. The study recommends that enabling legislations should be put in place to mandate enhanced sustainability practices among all deposit money banks in Nigeria as well as facilitate meaningful evaluation and measurement of earnings, social and environmental impacts in all areas of bank operations in Nigeria.

The Interplay between Working Capital Management and a Firm’s Financial Performance across the Corporate Life Cycle

The purpose of this study is to examine the impact of working capital management (WCM) and working capital strategy (WCS) on firm’s financial performance across different stages of the corporate life cycle (CLC). We use Pakistani non-financial listed firms nested in 12 diverse industries over a period of 2005–2014 as the research sample and employ the hierarchical linear mixed (HLM) estimator, which can process multilevel data where observations are not completely independent. The empirical findings reveal that, overall, WCM is negatively associated with firm performance. However, this association is not static across different stages of a firm’s life cycle. For example, a negative association is more pronounced at the introduction stage followed by growth and decline stages, whereas WCM does not significantly impact the performance of mature firms. Likewise, WCS also causes varying effects on the financial performance across the CLC. A conservative strategy at the introduction, growth, and decline stages negatively affects firm performance, suggesting that these firms should adopt an aggressive strategy. Nevertheless, management of sample firms did not account for the respective life cycle stage while formulating a WCM strategy, which can seriously compromise their financial sustainability. These findings suggest that firms require customized WCM policies and WCS to attain sustainable financial performance at each stage of firm life cycle. Thus, managers should not overlook the significant role of CLC stages in their financial planning to ensure the sustainable functioning of the enterprise.

Pengukuran Efisiensi Serta Analisis Faktor Internal dan Eksternal Bank yang Memengaruhinya

Efficiency for the banking industry as a whole is the most important aspect considered to realize healthy and sustainable financial performance. Therefore, to realize a healthy and sustainable financial performance, the government intervenes in the banking business to divide or categorize banks based on core capital. This study will measure the efficiency level of conventional commercial banks with input variables that are thought to affect the output variable using non-parametric methods with the Data Envelopment Analysis (DEA) model. Bank size (SIZE), Capital Adequacy Ratio (CAR), and Loan to Deposit Ratio (LDR) proved to have a significant positive effect on the efficiency of banks listed on the Indonesia Stock Exchange for the period 2013-2017. Meanwhile, non-performing loan (NPL) proved to have a significant negative effect on the efficiency of banks listed on the Indonesia Stock Exchange for the period 2013-2017. External factors such as the rupiah exchange rate (KURS), Bank Indonesia interest rates (SBI), and gross domestic product (GDP) have proven to have no significant positive effect on the efficiency of banks listed on the Indonesian Stock Exchange in the period 2013-2017.

A Holistic Sustainable Finance Model for the Sustainable Capital Market

This paper, has systematized the literature review, and with its critical view towards international and especially European sustainable finance policy and methodologies, has marked three important problems that affect up until today the design and implementation of environmental, social and sustainable policies in the sustainable financial performance of capital market. Environmental, social and sustainable performance measures, as well as the taxonomy system, the evaluation and notification of information that are related to the consequences of sustainable policies, represent a modern challenge for creating a completer methodology in the field of sustainable finance. In a practical level the challenge still remains: 1) if the policies, methodologies and researches in this category, allow researchers and financial stakeholders, as well as firms managers to follow and to evaluate sustainable finance in a reliable manner, 2) if the sustainable policies of firms are successful and recognized by the capital market. As every new scientific field, so “Sustainable Finance” must be framed with theories that should define the efficient operation of “Sustainable Market Capital” and get new holistic “Sustainable Finance model” created. The purpose of this paper is to define the theory of Sustainable Capital Market and the Holistic Sustainable Finance Models.

Does CSR Influence Firm Performance Indicators? Evidence from Chinese Pharmaceutical Enterprises

This research is carried out in the backdrop of increasing product quality and environmental degradation scandals associated with Chinese Pharmaceuticals in recent years. We examined the data of 125 Chinese Pharmaceuticals between 2010–2016 to investigate the impact of overall corporate social responsibility (CSR) performance as well as the performance on five unique aspects of CSR such as shareholders, employees, customers and suppliers, environmental practices, and the society to gauge the impact of these individual dimensions on the firm’s financial performance. The Hexun rating system is used to gauge a firm’s CSR performance on various stakeholder dimensions as it is one of the widely accepted CSR measurement criteria in China. The firm performance is measured by Tobin’s Q, return on assets (ROA), return on equity (ROE), and earnings per share (EPS) ratios. The outcome of the panel-based regression models reveals that the overall CSR score has a positive and significant influence on a firm’s financial indicators. Moreover, although all the CSR dimensions relate positively to firm performance, the environmental aspect of CSR has the most profound impact on firm performance followed by customers and suppliers, and employees. However, the shareholders and social dimensions have a relatively lesser influence on firm performance. These results imply that Chinese Pharmaceuticals shall further optimize each aspect of CSR performance as it can not only create a favorable brand image for various stakeholders but also results in sustainable financial performance.

Evaluasi Implementasi Strategi Bersaing PT. Semen Tonasa dengan Balanced Scorecard

Strategi bersaing memungkinkan perusahaan untuk mendapatkan keunggulan bersaing atas pesaingnya dan mempertahankan keberhasilannya di pasar. Penelitan ini bertujuan untuk mengetahui implementasi strategi bersaing pada PT Semen Tonasa, serta mengevaluasi implementasi dari strategi bersaing tersebut dengan 4 indikator Balanced Scorecard, yaitu perspektif keuangan, perspektif pelanggan, perspektif proses bisnis internal, dan perspektif pembelajaran dan pertumbuhan. Jenis penelitian yang digunakan adalah penelitian deskriptif kualitatif. Pengumpulan data dilakukan menggunakan Kuesioner dan observasi. Sumber data menggunakan data primer dan data sekunder. Populasi dalam penelitian ini adalah seluruh karyawan dan pelanggan/konsumen PT. Semen Tonasa. Dalam penelitian ini menggunakan Sampel Random Sampling. Analisis data yang digunakan dalam penelitian ini menggunakan pendekatan empat prespektif Balanced Scorecard dengan mengembangkan pengukuran yang relevan menggunakan 12 Critical Succes Factors (CSFs). Hasil penelitian ini menunjukkan bahwa strategi Utama PT Semen Tonasa sudah mencakup 4 perspektif dari Balanced Scorecard yaitu Optimalisasi Peningkatan Efisiensi Produksi, Customer Relationship Marketing, Pertumbuhan Kinerja Keuangan Berkelanjutan, Effective Human Resource Management dan Sustainability CSR. Sejalan dengan strategi utama PT Semen Tonasa, manajemen PT Semen Tonasa melakukan beberapa strategi yaitu strategi pasar, strategi produksi, strategi energi, strategi cost efisiensi, dan strategi SDM. Strategi Bersaing yang diimplementasikan oleh PT Semen Tonasa adalah strategi kepemimpinan biaya (Cost Leadership), ini ditunjukkan dengan sebagian besar inisiatif strateginya menfokuskan pada efisiensi biaya, yang bertujuan untuk menekan COGS agar bisa bersaing dengan pesaingnya

Nexus between sustainability management and financial performance - study on manufacturing firms from global emerging market

The objective of this study is to identify and analyse the causal relationship between a firm's sustainability management practices and its financial performance in global emerging economies. This study includes Granger causality and regression analysis of panel data of seven years for 119 manufacturing firms on environment, social and governance (ESG) indicators and measures for financial performance, i.e., ROA, ROE, price to book value and debt equity ratio. Through this study, we found that ESG factors hurt the financial performance of firms, but the vice-versa is may not true. Implications and future research have been suggested based on our observations.

Corporate Social Sustainability Reporting and Financial Performance of Oil and Gas Industry in Nigeria

This study examined corporate social sustainability reporting and financial performance of Oil and Gas Industry in Nigeria. Issues regarding corporate sustainability have gained global relevance in recent times owing to the increasing awareness that activities of most organizations may have adverse implicational effects on the ecosystems, societies, and environments of the future. Thus, companies are now being required to extend their strategic policies and information reportage to encompass sustainability reporting practices in order to meet the environmental and social needs of both current and future stakeholders. It is on this light that this study was set out to examine the effect of sustainability reporting on the financial performance of listed oil and gas companies in Nigeria. This study assessed the effect of corporate social sustainability reporting on Return on Assets, Return on Equity, and Return on Capital Employed of oil and gas companies listed on the Nigeria Stock Exchange. Ten oil and gas companies were sampled for the study. The study utilized secondary data collected via financial ratios and accounts of the individual companies and content analysis. The findings showed that social sustainability reporting exerts negative effect on all three performance proxies, howbeit only its effect on return on equity was statistically significant. The study recommends, among others, that existing sustainability reporting standards should be aligned to reflect country-specific social and environmental challenges, while its implementation should rather be obligatory rather than voluntary.

Cash Flow Management as a Tool for Corporate Processes Optimization

ABSTRACTThe paper presents the results of qualitative and quantitative research in the area of corporate treasury management with the specific focus on the corporate cash flow management in the automotive sector. The up-to-date topic of cash flow management in theory and practice is evoked by the need to sustainably and efficiently manage the large volume of cash flow in multinational corporations. Qualitative research results provide critical analysis, evaluation and discussion of approaches to compiling and predicting of corporate cash flow. Based on the results of empirical research in the selected automotive company in central Europe, business processes for optimization have been identified and designed. The optimization of these business processes indicates a positive and significant impact on the optimization of corporate cash flow planning and forecasting with the aim of achieving of sustainable financial position and business performance in industrial companies in the technical, economic, environmental and social conditions of the twenty-first century. The application of the proposed optimization process of the selected corporate processes with a positive effect on the cash flow management influences the efficiency increase in investment decision-making with respect to the selection of the type and financial difficulty of the investment in smart technologies and components.

The relationship between corporate social responsibility and sustainable financial performance: firm‐level evidence from Taiwan

AbstractThis study examines the relationship between corporate social responsibility (CSR) and corporate financial performance (CFP) in Taiwan. Using CSR awards as a social responsibility indicator, this study finds that socially responsible firms can achieve financial results superior to those of firms which do not pursue CSR initiatives. The relationship remains after endogeneity is treated. The Google Search Volume Index (SVI) is used as a specific proxy for firm visibility, observing that it has a positive influence on the CSR–CFP relationship. On further separation of the sample into electronics and non‐electronics industries, the results demonstrate that SVI has a positive influence on the CSR–CFP relationship in the electronics industry. For the non‐electronics industries, the results reveal that board ownership has a significant positive influence on the CSR–CFP relationship, and a negative relationship if it is a family business.

The paradoxical nexus between corporate social responsibility and sustainable financial performance: Evidence from the international construction business

AbstractThe aim of the research is to substantiate the hypothesis of a paradoxical dynamic link between corporate social responsibility (CSR) and its material implications including sustainable corporate financial performance (CFP). By analysing a panel of 67 international construction companies from 2006 to 2015, we found that CSR programs can be detrimental to CFP in the short term but conducive to improving it in the long term. The findings of this research indicate that, in the international construction business, the impact of CSR on CFP is not immediate and unchanging, and it takes time to materialize CSR for sustainable development. A significant practical use of this research is to provide evidence for the assertion that business stakeholders should be relieved from short‐termism in assuming social responsibility. Further research is recommended to test this support in a more general business setting towards developing a general theory on CSR and sustainable development.

Is sustainability a competitive advantage for small businesses? An empirical analysis of possible mediators in the sustainability–financial performance relationship

Abstract The contribution of a single firm to sustainable development is largely dependent on the firm's perceptions of the advantages of sustainability strategies and consequent practices. The relationship between corporate social performance and corporate financial performance has been heavily debated, with mixed results. Our research is aimed at defining a model in which sustainability practices affect firm financial performance via strategic drivers or antecedents of firm success. We used structural equation modeling on data collected via survey of 348 Italian manufacturing small and medium-sized enterprises. We included four constructs dedicated to sustainability, a construct dedicated to financial performance and four constructs measuring the possible mediators in the sustainability-financial performance relationship. We found that the social, economic and formal practices dimensions of sustainability positively affect competitive advantage, mediated by corporate reputation, customer satisfaction and organisational commitment. We also found competitive advantage to be a second-stage mediator that positively contributes to financial performance. The contribution of our study lies in having tested a new model of the sustainability-financial performance relationship, considering each dimension of sustainability and a path through different mediators in an under-explored context—that of manufacturing small businesses in a European country.