The Adoption of Lean Operations and Lean Accounting on the Profitability and Cash Flows of Publicly Traded Companies

Abstract

Purpose

Companies that adopt lean operations and lean accounting ultimately should achieve better profitability and cash flows than similarly situated companies that do not adopt lean operations and lean accounting.

Methodology

Archival data is analyzed through Wilcoxon signed-ranks, matched-pairs tests.

Findings

Lean companies had greater returns on net operating assets (RNOA), returns on total assets (ROA), operating cash flows, and cash-adequacy ratios than Non-Lean companies. These results were driven by the larger Lean companies. The profit margins and financing-assets ratios also were marginally better for the Lean companies than the Non-Lean companies.

Implications

Lean companies have achieved benefits proposed by the proponents of lean operations. The present study provides a starting point for further research on the financial performance of Lean companies using archival data.

Originality/value

There is limited research on the financial performance of Lean companies that is based on archival data. The present study fills a void in the academic literature. This study measures RNOA, which does not confound operating and financing activities. Additionally, this study utilized a methodology that provides reasonable assurance of the identification of both Lean companies and Non-Lean companies from publicly available data.

Citation

Harris, D. and Cassidy, J. (2014), "The Adoption of Lean Operations and Lean Accounting on the Profitability and Cash Flows of Publicly Traded Companies", Advances in Management Accounting (Advances in Management Accounting, Vol. 22), Emerald Group Publishing Limited, Leeds, pp. 71-96. https://doi.org/10.1108/S1474-7871(2013)0000022009