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Open Access
Article
Publication date: 2 May 2023

Rejaul Karim, Md. Abdullah Al Mamun and Abu Sadeque Md. Kamruzzaman

The purpose of the present study is to determine how the cash conversion cycle (CCC) affects the financial performance of manufacturing companies in Bangladesh.

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Abstract

Purpose

The purpose of the present study is to determine how the cash conversion cycle (CCC) affects the financial performance of manufacturing companies in Bangladesh.

Design/methodology/approach

The authors have collected data of 61 Dhaka Stock Exchange (DSE)-listed firms from the 10 distinct manufacturing industries of Bangladesh for 18 years, from 2003 to 2020. The data have been analyzed through the two-steps system generalized method of moment (GMM) regression model, using profitability indicators return on asset (ROA) and earnings per share (EPS) as dependent variables, while CCC has been used as the independent variable, whereas asset turnover (ATO) and financial leverage (LEV) were used as control variables to assess the relationship between the CCC and financial performance.

Findings

The findings indicated that CCC has a negative connection with profitability – ROA and EPS, with the connection between CCC and EPS being highly significant. This indicates that reducing the inventory conversion time, reducing the period of receivable collection and making payments to creditors with potential delays might help Bangladeshi manufacturing firms boost their profitability. In addition, the firm-specific characteristics, namely ATO and LEV significantly affect the firm's profitability.

Research limitations/implications

The research was based only on secondary sources and information was scarce. This research was conducted to determine the impact of the CCC on the corporate profitability of the manufacturing sector solely. There might be many other working capital variables that are still unexplored through this study.

Practical implications

The current study's findings are consistent with the traditional rule that minimizing the firm's days of the cash cycle may optimize financial performance. The results of this research have added to the existing body of knowledge on the topic of working capital management (WCM). Future research endeavors can be initiated for assessing the impact of the CCC on the firm's profitability in other industrial sectors or to identify other working capital variables that have much impact on corporate profitability.

Originality/value

This study is an original work of the researchers and adds value to the current literature in the domain of WCM and corporate profitability. The present study is the first one that covers firms in all the manufacturing industries in Bangladesh. The corporate managers, creditors, investors and other concerned stakeholders will be benefited from the findings of the present study.

Details

Asian Journal of Economics and Banking, vol. 8 no. 1
Type: Research Article
ISSN: 2615-9821

Keywords

Article
Publication date: 24 October 2023

Umar Habibu Umar and Mamdouh Abdulaziz Saleh Al-Faryan

This study investigated how working capital management (WCM) influences the profitability of listed halal food and beverage companies.

Abstract

Purpose

This study investigated how working capital management (WCM) influences the profitability of listed halal food and beverage companies.

Design/methodology/approach

The study utilized a sample of 56 listed halal food and beverage companies operating in Indonesia, Malaysia, Saudi Arabia, Pakistan and the United Arab Emirates (UAE). Unbalanced panel data were generated from the Bloomberg database between 2008 and 2021. Besides, the study employed the two-step system generalized method of moments (GMM) technique for the estimation, which can address the models' endogeneity, heteroskedasticity and autocorrelation problems. Also, feasible generalized least square (FGLS) regression was applied to check the robustness of the results.

Findings

The study revealed that the cash conversion cycle (CCC) and accounts receivable period (ARP) significantly reduced firm profitability. Also, the inventory conversion period (ICP) significantly reduced return on assets (ROA) but insignificantly influenced return on equity (ROE). However, the results showed that the accounts payable period (APP) significantly increased firm profitability. These findings are robust to the results obtained by applying FGLS regression.

Research limitations/implications

The study utilized a sample of only the listed halal food and beverage firms that operate in Indonesia, Malaysia, Saudi Arabia, Pakistan and the United Arab Emirates (UAE).

Practical implications

The study suggests that the management of listed halal firms should adopt an aggressive policy in managing their working capital in order to enhance their financial performance. This could be attained by lowering CCC when ARP and ICP are reduced and APP is increased.

Originality/value

This study contributes to the literature by providing cross-country empirical evidence showing how working capital and its components affect the financial performance of firms that solely produce or buy and sell halal food and beverage products in five countries.

Article
Publication date: 12 March 2024

Wei Wu, Chau Le, Yulu Shi and Fadi Alkaraan

Financial flexibility and investment efficiency are of vital importance in strategic choices at boardrooms, particularly in post-crisis recovery strategies. This study examines…

Abstract

Purpose

Financial flexibility and investment efficiency are of vital importance in strategic choices at boardrooms, particularly in post-crisis recovery strategies. This study examines the moderating effects of investment efficiency and investment scale on the relationship between financial flexibility and firm performance.

Design/methodology/approach

The authors use sample of 10,755 US-listed firms over the period 2010–2021 to examine the relationships between investment scale, investment efficiency, financial flexibility and firm performance. Particular attention is paid to overinvestment and underinvestment.

Findings

Findings of this study reveal that financial flexibility mitigates investment inefficiency through reducing overinvestment. Financial flexibility contributes to boost a firm’s accounting and market performance. Additionally, investment efficiency and investment scale have moderating effects on the relationship between financial flexibility and firm performance. However, the influence of investment efficiency is greater than the influence of investment scale. Finally, the authors find that the direct and indirect effects of financial flexibility are stronger on market performance than accounting performance, implying that market is more sensitive to corporate financial policies.

Research limitations/implications

Findings of this study have implications for scholars, decision-makers policymakers, investors and other stakeholders.

Practical implications

This study has its own limitations due to the sample selection issues, country context and the research model adopted by this study.

Originality/value

The novel contribution to the extant literature is incorporating the influence of investment scale and investment efficiency into the relationship between financial flexibility and firm performance.

Details

Journal of Applied Accounting Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 11 October 2023

Hania Waleed Tawfik El-Feel, Diana Mostafa Mohamed, Hala Magdy Amin and Khaled Hussainey

This paper aims to provide insights into the complicated relationship between earnings management (EM) and corporate social responsibility (CSR) during the financial downturn…

Abstract

Purpose

This paper aims to provide insights into the complicated relationship between earnings management (EM) and corporate social responsibility (CSR) during the financial downturn caused by the COVID-19 pandemic.

Design/methodology/approach

Parametric t-tests and non-parametric Wilcoxon rank-sum tests accompanied by ordinary least squares regression analysis, augmented with Newey–West procedure approaches, are used for a sample that consists of 1,984 firms from 47 countries for the period of 2014–2020. EM was proxied once with discretionary accruals using the modified Jones model (1995) and once with real earnings management (REM) using the Roychowdhury model (2006). This study uses environmental, social, and governance scores from the Thomson Reuters database as a proxy for CSR.

Findings

The results reveal that firms tend to engage more in EM practices during the pandemic and that more socially responsible firms tend to be honest and transparent during the financial reporting process. Interestingly, it was found that more socially responsible firms engaged less in REM practices during the pandemic.

Research limitations/implications

The findings of this research help lenders, investors, policymakers and managers gain a better understanding of EM practices during a negative shock and shed light on the importance of CSR in being ethical.

Originality/value

The findings extend both the literature on the role of CSR in promoting financial reporting quality and the literature on the impact of COVID-19 on accrual and REM practices.

Details

Journal of Financial Reporting and Accounting, vol. 22 no. 1
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 12 January 2024

Peter Njagi Kirimi

This study aims to examine the effect of ownership structure on financial performance of commercial banks in Kenya.

Abstract

Purpose

This study aims to examine the effect of ownership structure on financial performance of commercial banks in Kenya.

Design/methodology/approach

The data were collected from audited financial statements of 39 commercial banks in Kenya for the period 2009–2020.

Findings

Regression results found evidence of ownership structure explaining commercial banks’ financial performance. The results found a negative association between state ownership and net interest margin, a negative association between management ownership and net interest margin and a negative association between institutional ownership and return on assets.

Practical implications

Based on the findings, commercial bank management should therefore devise ownership structure policies that are geared toward boosting their financial performance both in the short run and the long run. Second, this study recommends a minority shareholding of the state in commercial banks to deter political interference, protect investors’ wealth from erosion and allow the majority shareholders to adopt a strong corporate governance mechanism for higher financial performance. Banks with a high percentage of state ownership should consider partial privatization to improve corporate governance practices. Third, banks should adopt a managerial ownership policy limiting the proportion of equity stock held by executives to limit their powers in strategic decision-making. Fourth, this study proposes a percentage limit on the equity stock of an institutional investor to eliminate bureaucracy in strategic decision-making and protect investors’ wealth.

Originality/value

The study finding is meant to inform regulation and operation policies in the banking sector and contribute to the literature on ownership structure, especially in the banking sector.

Details

Measuring Business Excellence, vol. 28 no. 1
Type: Research Article
ISSN: 1368-3047

Keywords

Article
Publication date: 17 November 2023

Barnali Chaklader and Hardeep Singh Mundi

The paper examines contingent liabilities' effect on the firm's dividend decisions.

Abstract

Purpose

The paper examines contingent liabilities' effect on the firm's dividend decisions.

Design/methodology/approach

Fixed-effects regression and logit model results estimate the influence of contingent liabilities on firms' dividend decisions using a sample of 2,288 firm-year observations of S&P 500 firms from 2012 until 2022. Robustness checks and results from the 2SLS model further support the authors’ findings.

Findings

The results show that contingent liabilities negatively affect dividend payment decisions. This analysis further demonstrates that the stated effect of contingent liabilities on dividend decisions is more substantial for firms with financing deficits and those with above-industry-average corporate governance scores.

Research limitations/implications

There needs to be more systematic conceptual reason for measuring uncertainty for firms and its influence on dividend decisions. Future research should use other measures of firm uncertainty to examine the relation of the firm's uncertainty with dividend decisions.

Practical implications

The authors suggest that contingent liabilities create uncertainty for future cash flows, influence a firm's agency costs and provide credible signals on a firm's prospects to the market. The findings support existing literature that measurable firm-specific variables significantly influence a firm's dividend decisions. The results are robust for an alternative explanation.

Originality/value

By investigating the impact of the influence of contingent liabilities on dividends, the authors extend research on dividend decisions and attempt to provide insights into a firm's dividend decisions by incorporating an off-the-balance sheet item (contingent liabilities) as a significant predictor for dividend decisions.

Details

Managerial Finance, vol. 50 no. 4
Type: Research Article
ISSN: 0307-4358

Keywords

Open Access
Article
Publication date: 19 December 2023

Rafal Kusa, Marcin Suder, Joanna Duda, Wojciech Czakon and David Juárez-Varón

This study investigates the impact of entrepreneurial orientation (EO) and knowledge management (KM) on firm performance (PERF), as well as the mediating role of KM in the EO–PERF…

Abstract

Purpose

This study investigates the impact of entrepreneurial orientation (EO) and knowledge management (KM) on firm performance (PERF), as well as the mediating role of KM in the EO–PERF (EO-PERF relationship). In particular, this study aims to explain the impact of KM on the relationship between the EO dimensions and PERF; dimensions are risk-taking (RT), innovativeness (IN) and proactiveness (PR).

Design/methodology/approach

This study uses structural equation modelling and fuzzy-set qualitative comparative analysis (fsQCA) methodologies to explore target relationships. The sample consists of 150 small furniture manufacturers operating in Poland (out of 1,480 in the population).

Findings

The study findings show that KM partially mediates the IN–PERF relationship. Furthermore, fsQCA reveals that KM accompanied by IN is a core condition that leads to PERF. Moreover, the absence of KM (accompanied by the absence of RT and IN) leads to the absence of PERF. In addition, the results show that all the variables examined (RT, IN, PR and KM) positively impact PERF.

Originality/value

This study explores the role of KM in the context of EO and its impact on PERF in the low-tech industry. The study uses simultaneously two methodologies that represent different approaches in the search for the expected relationships. The findings reveal that KM mediates the EO-PERF relationship.

Details

Journal of Knowledge Management, vol. 28 no. 11
Type: Research Article
ISSN: 1367-3270

Keywords

Article
Publication date: 23 March 2022

Manish Bansal

The study aims at examining the relationship between the forms of misclassification practices, namely expense shifting and revenue shifting. In particular, the study aims at…

Abstract

Purpose

The study aims at examining the relationship between the forms of misclassification practices, namely expense shifting and revenue shifting. In particular, the study aims at identifying the form of shifting that has been preferred by firms to meet the industry average profitability.

Design/methodology/approach

Core earnings and operating revenue expectation models are used to measure expense shifting and revenue shifting, respectively. The panel fixed-effects models are used to control for unobserved heterogeneity across industries and time.

Findings

Based on a sample of Bombay Stock Exchange-listed firms, the author finds that firms prefer expense shifting over revenue shifting to meet industry average profitability, implying that firms choose the shifting tool based on the relative advantage. Further, the findings deduced from the empirical results demonstrate that firm life cycle and mandatory adoption of International Financial Reporting Standards (IFRS) moderates the relationship between shifting forms and industry average profitability. However, the negative impact of IFRS on shifting practices is found to be less pronounced among BigN audit firms.

Originality/value

The study is among the pioneering attempt to document the substitution relationship between shifting forms. It is the first study that examines a form of classification shifting, where gross profit and core earnings both change as an effect of misclassification.

Details

South Asian Journal of Business Studies, vol. 13 no. 1
Type: Research Article
ISSN: 2398-628X

Keywords

Book part
Publication date: 14 March 2024

Werner Kunz, Jochen Wirtz, Nicole Hartley and James Tarbit

Artificial intelligence (AI) is revolutionizing businesses and daily life, with AI-powered technologies like personal assistants and medical diagnostic systems transforming how we…

Abstract

Artificial intelligence (AI) is revolutionizing businesses and daily life, with AI-powered technologies like personal assistants and medical diagnostic systems transforming how we interact and make decisions. However, the ethical implications of these technologies cannot be ignored. AI systems can produce biased results and decisions if not designed to be fair and unbiased. Corporate digital responsibility (CDR) provides a valuable framework for addressing these ethical dilemmas. Service organizations need to navigate CDR issues across the data and technology life-cycle stages (e.g., their creation, operation, refinement, and retention) and across its digital service ecosystem (including its external business partners). Despite the risks associated with poor CDR practices, companies may adopt them to benefit from data monetization, enhanced customer experience, and productivity improvement. To mitigate these risks and build a strong CDR culture, organizations need to establish ethical norms, prioritize customer privacy, and ensure equitable power dynamics with business partners. The emergence of generative AI poses enhanced CDR challenges, such as AI complexity, monitoring, accountability, and workforce changes. Going forward, CDR is a crucial framework for firms to address the needs of their multiple stakeholders and to ensure sustainable business practices in the increasingly digital service world.

Details

The Impact of Digitalization on Current Marketing Strategies
Type: Book
ISBN: 978-1-83753-686-3

Keywords

Article
Publication date: 12 September 2023

Myriam Ertz, Shashi Kashav, Tian Zeng and Shouheng Sun

Traditionally, life cycle assessment (LCA) has focused on environmental aspects, but integrating social aspects in LCA has gained traction among scholars and practitioners. This…

Abstract

Purpose

Traditionally, life cycle assessment (LCA) has focused on environmental aspects, but integrating social aspects in LCA has gained traction among scholars and practitioners. This study aims to review key social life cycle assessment (SLCA) themes, namely, drivers and barriers of SLCA implementation, methodology and measurement metrics, classification of initiatives to improve SLCA and customer perspectives in SLCA.

Design/methodology/approach

A total of 148 scientific papers extracted from the Web of Science database were used and analyzed using bibliometric and content analysis.

Findings

The findings suggest that the existing research ignores several aspects of SCLA, which impedes positive growth in topical scholarship, and the study proposes a classification of SLCA research paths to enrich future research. This study contributes positively to SLCA by further developing this area, and as such, this research is a primer to gain deeper knowledge about the state-of-the-art in SLCA as well as to foresee its future scope and challenges.

Originality/value

The study provides an up-to-date review of extant research pertaining to SLCA.

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