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Examining the Outliers

Torben Juul Andersen (Copenhagen Business School, Denmark)

A Study of Risky Business Outcomes: Adapting to Strategic Disruption

ISBN: 978-1-83797-075-9, eISBN: 978-1-83797-074-2

Publication date: 29 September 2023


In this chapter, we first examine the distribution characteristics of firm performance across different competitive industry contexts and periodic economic conditions of growth, recession, and recovery. There is mounting evidence that the contours of accounting-based economic returns consistently display (extreme) left-skewed leptokurtic distributions with negative risk-return relationships, which implies the existence of many negative performance outliers and some positive outliers. We note how negative skewness, excess kurtosis, and inverse risk-return relationships prevail in industries with more intense competition and in economic growth scenarios where more innovative initiatives compete. As the study of outliers typically is ignored in mainstream management studies, we extract a total of 23 extreme performers using a conventional winsorization technique that identifies 16 negative and 7 positive outliers. We study the performance trajectories of these firms over the full period and find that negative performers typically operate in capital-intensive innovative industries whereas positive performers operate in activities that cater to prevailing demand conditions and expand the business in a balanced manner. The firms that under- and over-perform as measured by the financial return ratio both constitute smaller firms compared to the total sample and show how relative movements in the ratio numerator and denominator affect the recorded return measure. However, the negative outliers generally use their public listing to access capital for investment in more risky development efforts that require a certain scale to succeed and thereby limits their flexibility. The positive outliers appear to expand their business activities in incremental responses to evolving market demands as a way to enhance maneuverability and secure competitive advantage by honing their unique firm-specific capabilities.



Andersen, T.J. (2023), "Examining the Outliers", A Study of Risky Business Outcomes: Adapting to Strategic Disruption (Emerald Studies in Global Strategic Responsiveness), Emerald Publishing Limited, Leeds, pp. 121-142.



Emerald Publishing Limited

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