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The purpose of this paper is to provide insights about corporate finance decision-making of Icelandic private firms that have experienced a dramatic financial crisis in 2008–2010. It observes the capital budgeting methods and cost of capital techniques for private firms after a systemic financial crisis. Moreover, the paper identifies the main determinants of capital structure and capita rationing during this period.

This paper surveys corporate finance practices of 80 out of the 250 largest bank-centred private firms after the financial crisis.

Highly leveraged private firms that have experienced a dramatic financial crisis in 2008–2010 use payback and net present value techniques almost at a similar rate when assessing new investments. The sample firms largely rely on the cost of debt to determine the cost of invested capital. However, capital asset pricing model is the most popular method among the few sample firms that estimate the cost of equity. The need to maintain financial flexibility and cost associated with financial distress are the most influential factors regarding capital structures, whereas investment practices avoid capital rationing associated with the financial crisis.

The limitations of the study are that it is country specific and absence of data over the period before the financial crisis that may have been applied to present more insight into this topic.

Sample firms fail to incorporate appropriate cost of capital methods and as the result they are likely to apply incorrect “hurdle rate” which could undervalue or overvalue new investments. This paper indicates that capital budgeting decisions by managers of the bank-centred Icelandic private firms who tend to be major shareholders do not reflect the tendency to expropriate outside and minority investors. Private firms that have emerged from the meltdown of the financial system highlighting the importance of “special” lending relationship in assisting bank-centred firms to avoid the severity of financial constraints.

This study employs a failure of the banking system to provide new knowledge about corporate finance practices of private firms after the financial crisis that have curtailed the access to both internal and external sources of capital.

The purpose of this paper is to provide empirical insight into the impact of a financial crisis on capital structure of private firms. Specifically, the authors use the example of the systemic Icelandic financial crisis from 2008 to 2010 and analyze the influence of internally generated funds on leverage during the financial crisis compared to the non-crisis period.

The authors use a fixed-effects dynamic model to examine the impact of internally generated funds – measured as cash flow – with a data set that includes non-listed Icelandic firms. In addition, generalized method of moments is used to address potential endogeneity issues.

The authors find that internally generated funds have a different effect on capital structure during the financial crisis compared to the non-crisis period. While cash flow has an overall negative association with leverage, a positive relationship appears to exist during the crisis. However, when analyzing changes in cash flow from one year to the other, the sample firms appear to rely more on internally generated funds to adjust leverage during the financial crisis than in the non-crisis period.

Analyzing the extreme case of the Icelandic financial crisis allows us to shed light on capital structure effects in situations when both debt financing and internal financing opportunities are heavily curtailed.

The purpose of this paper is to investigate the role of macroeconomic factors and the institutional environment on corporate financial flexibility (FF). Most studies focus on well-developed financial markets and very little is known about corporate FF in less developed financial markets and emerging markets (Buvanendra et al., 2016). The present study contributes to filling this gap in the literature and provides a more practical and functional framework to assess the FF of firms located in emerging economies.

The study used annual data for the period from 1991 to 2018. To examine the relationship between macroeconomic indicators, institutional environment and corporate FF, hypotheses were tested using an unbalanced panel logistic regression model.

The paper provides empirical insights into the relationships between macroeconomic factors, institutional environment and corporate FF. The results suggest a substantial change in FF across firms. Inflation, institutional quality and banking sector development negatively affect FF, while equity market development has a significant positive impact. Gross domestic product growth was found to be an insignificant predictor of FF.

This study has practical implications for corporate finance managers, regulators and investors, who must consider the significant factors of this study when making economic decisions. Finance managers can thus make appropriate decisions regarding capital structure and FF. Regulators of the banking sector can take appropriate measures to enhance competition and increase the development of the banking sector. Further, regulators of the equity market can enhance the development of the market to enhance the supply of capital.

This study adds to the literature showing that not only firm-specific factors affect corporate FF, but country-specific macroeconomic and institutional factors also have a significant effect. It also adds to the literature in the area of corporate FF; this field is in its initial stage, even in developed countries, while, in developing countries, little work has been done.

The purpose of this paper is to examine the extreme case of the Icelandic banking crisis in relation to critical governance issues at governmental, industry and civil society levels.

This is a case study of the Icelandic banking collapse in 2008.

The examination of governance failures within the Icelandic banking system reveals that government institutions need to find a balance between entrepreneurial growth, risk exposure and sustainable societal development. A euphoric attitude of laissez‐faire, where risk issues and issues of balanced development are largely ignored, creates challenges for sustainable banking. The findings suggest that achieving the necessary balance requires stressing governance issues on three levels; at the government level; at the industry level; and at the civil society level.

The paper illustrates why some of the corporate governance challenges facing sustainable banking should be addressed at multiple levels. Government should strive for realistic information and evaluation of societal risks; government should implement adequate regulatory frameworks; the finance industry itself should have effective self‐regulatory procedures and mechanisms; and, from a civil society point of view, the public at large should have realistic expectations and be adequately alerted as to the potential risks of governance failure.

The paper examines interactions between governance failures at different levels and has important implications for governance and policy makers, particularly those faced with re‐structuring national financial industries.

This paper asks the question of whether more environmental uncertainty affects the design of performance measurement systems in terms of a greater variety of performance measures and whether this leads to more management satisfaction with the performance measurement system and improved firm performance.

Information processing theory is used to frame the hypotheses and findings. A questionnaire was sent to the 300 largest companies in Iceland, where environmental uncertainty has been prevalent.

The results indicate that increased uncertainty leads to a larger variety of non-financial performance measures, such as customer measures. A positive relationship is found between management satisfaction with the performance measurement system and firm performance. However, the variety of performance measures was not linked to management satisfaction or firm performance.

The results suggest that managers increase the variety of performance measures when uncertainty increases. However, it is not the variety itself that increases management satisfaction or improves firm performance.

Performance measurement design is affected by environmental uncertainty. Managers focus on important stakeholder groups such as customers under such conditions and can consult research and practice for the purpose of customer relationship management and customer profitability measurement to improve measurement selection.

This work focusses on performance measurement system design, examining the use of more than 50 different performance measures, and differentiates between small and medium-sized firms and between service and non-service firms.

This paper investigates the use of management controls when environmental uncertainty and hostility increase abruptly. Specifically, it explores this in the context of the 2008 financial crisis in six banks located in two countries.

The paper is based on 26 qualitative interviews with selected managers employed by the six banks. Eight interview guides were developed based on the typology of controls in Malmi and Brown (2008). Respondents explained which changes in management controls occurred after the crisis.

Both organic and mechanistic management controls were mobilized at the same time to deal with the change. The use of controls played three main roles: (1) guide and control behavior, (2) change internal and external perceptions and (3) discharge accountability. Finally, control use during a crisis evolves as individual managers design and implement controls. There is no “grand design” rationally guiding the design of the overall system of controls.

The use of management controls in dealing with an increase in uncertainty and hostility cannot be labeled either organic or mechanistic, but will depend on the specific type of change in environmental characteristics. Management controls evolve by interaction with outside actors, as well as internal techniques.

The purpose of this paper is to analyse the effect of knowledge management (KM) on value creation in Icelandic service firms. The aim is to examine how KM contributes to value creation, and measure the ways in which KM affects intangible assets, such as customer capital, innovation, and human capital.

The authors propose a survey approach conducted in 2007 among 222 firms (46.1 percent response rate). Of these firms 97 had KM programmes in place and this paper is based on these firms. Service firms were 60 percent of the firms that had implemented KM.

The findings of the study show that firms with KM report more value creation in the fields of customer capital, innovation and human capital compared to firms that have not introduced KM. This indicates that KM has a positive impact on intangible assets in firms, but given the few firms involved in the survey, findings need to be interpreted with care.

The findings of the study have highly practical implications for managers and researchers, as KM programmes seem to enhance the creation of intangible assets so vital for the competitive advantage of firms in a knowledge economy.

The paper analyses the effect on value creation of knowledge management in Icelandic service firms.

The purpose of this paper is to establish a baseline for the study of offshore outsourcing in Iceland. After an extensive search to identify any paper (English or Icelandic) that dealt with this topic turned up empty, it was decided that a comprehensive work was necessary to provide an opportunity for future comparative research.

Data were secured by interviewing the chief information officers (CIOs) or equivalent officers of the 11 largest corporations (by Icelandic standards). A checklist was used to focus the initial question session, and then the CIOs were permitted, and encouraged, to muse about their information technology (IT) operations. Insights were gathered on a set of problems, and some of those identified problems were quite unexpected.

Ten trends are identified consisting of aspects of: the difficulty of hiring qualified labor in‐country; establishment of strategy resides entirely within the IT management; security remains a serious concern; offshore subcontractors sometimes place their employees within Icelandic companies; mid‐ and upper‐level employees who can strategically develop networks and systems are in strong demand; use of information system (IS)/IT standards for information security is mostly voluntary; generally, the establishment of IS/IT strategy does not remain with board of directors; virtually all Icelandic corporations engage in, or have engaged in, outsourcing over the past five years (11 sub‐trends are identified); and the business school curricula is inadequate to the needs of Icelandic corporations with respect to IT demands.

Comparisons among Nordic and other small nations are not addressed. Virtually, every trend noted should be followed up with additional study. This paper is designed to establish baseline of current offspring activity in Iceland. It is by no means a definitive study.

Many research threads are identified and opened for future work. Academic programs can use this paper as motivation for modifications in existing programs and the creation of new one that better satisfies corporate needs.

Prior to this paper, there is no information available on the state of IT offshoring in the country of Iceland. A benchmark is now established against which future research can be measured.

The purpose of this paper is to model SME board configurations and then to examine empirically their diversity. Polarity in corporate board research around two primary tasks (control and service/strategy), neither captures comprehensively the range of SME board types, based on what they actually do, nor elucidates how boards configure and why. SME heterogeneity is problematic for understanding how the triumvirate of power and control – owners, directors and executives – governs in such firms.

Survey research is used to examine 186 French private SMEs. Factorial and cluster analyses are used to classify board configurations according to board task performance.

Results reveal six different board types among small firms. The findings indicate that both organisational and board design need to be adjusted to align with the differentiation between the ownership and the management, and between the ownership and the directorship. The greater the differentiation between these power/control functions in response to increased internal and/or external contingencies, the more varied will be the board’s portfolio of tasks, with implications for the director capabilities and board competence.

The research extends SME board governance theory and practice by bringing greater clarity to the field of board task performance in SMEs. It provides insights into explicit board task-related configurational behaviour through recognising the degree of differentiation between the triumvirate power/control functions at the apex of the small firm. SME boards in the sample show not just a single configuration but a combination from a portfolio of tasks with different emphases on each according to their circumstances. This finding implies that a particular type of board may select a task, or set of tasks, from the portfolio, depending on the nature of the SME in terms of its proximity – whether it is characterised more by specificity or by denaturation. Further research is needed to understand the variation in these configurations over time in response to internal and external contingencies and what board emphases and processes are involved in transitioning through these evolutions.

The findings are important because the extent of knowledge about what the configuration comprises will determine how effectively a board will execute its tasks. This knowledge is useful in helping boards place emphasis on how best to concentrate their efforts on creating value for the SME, by selecting an effective combination of tasks from a given board configuration depending on their circumstances.

The research extends SME board governance theory and practice by bringing greater clarity to the field of board task performance in SMEs. It provides insights into explicit board task-related configurational behaviour through recognising the degree of differentiation between the triumvirate power/control functions at the apex of the small firm.

The purpose of this paper is to present the findings of a research conducted in Iceland during the period 2001‐2005 and in 2008 on how employees view their use of Electronic Records Management Systems (ERMS).

Qualitative methodology was used. Four organizations were studied in detail and another four provided a comparison. Open‐ended interviews and participant observations were the basic elements of the research. The research discovered the basic issues in the user‐friendliness of ERMS, the substitutes that employees turned to if they did not welcome ERMS, how confident employees were in their computer use and how they felt that their work could be shared and observed by others.

Employees seemed to regard ERMS as a groupware for constructive group work and not as an obtrusive part of a surveillance society. The research identified training as the most important factor in making employees confident in their use of ERMS. Participation in adapting the classification scheme to the ERMS changed the views that employees had regarding the user‐friendliness of the ERMS and their effectiveness as users.

This topic has not been studied as regards ERMS before. The research identifies the most important implementation factors and the issues that must be dealt with to make employees more content, confident and proficient users of ERMS.