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Article

Pirjo Ståhle, Sten Ståhle and Samuli Aho

The purpose of this study is to analyse the validity of the value added intellectual coefficient (VAIC) method as an indicator of intellectual capital.

Abstract

Purpose

The purpose of this study is to analyse the validity of the value added intellectual coefficient (VAIC) method as an indicator of intellectual capital.

Design/methodology/approach

The paper describes VAIC through its calculation formulae and aims to establish what exactly it is that the method measures. It also looks in detail at how intellectual capital is understood in the method, and discusses its conceptual confusions. Furthermore, the paper tests the hypothesis according to which VAIC correlates with a company's stock market value, and reflects the contradictory results of earlier studies.

Findings

The analyses show, first, that VAIC indicates the efficiency of the company's labour and capital investments, and has nothing to do with intellectual capital. Furthermore, the calculation method uses overlapping variables and has other serious validity problems. Second, the results do not lend support to the hypothesis that VAIC correlates with a company's stock market value. The main reasons behind the lack of consistency in earlier VAIC results lie in the confusion of capitalized and cash flow entities in the calculation of structural capital and in the misuse of intellectual capital concepts.

Practical implications

The analyses show that VAIC is an invalid measure of intellectual capital.

Originality/value

The result is important since the method has been widely used in micro and macro level analyses, but this is the first time it has been put to rigorous scientific analysis.

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Article

Harianto Lim and Rofikoh Rokhim

The purpose of this paper is to examine the factors affecting profitability of pharmaceutical company in Indonesia. While research and development has been the main…

Abstract

Purpose

The purpose of this paper is to examine the factors affecting profitability of pharmaceutical company in Indonesia. While research and development has been the main discussed issues in pharmaceutical sector development, scant attention has been paid to profitability factors determined by financial ratio specifically. The industry itself faces significant disruption with the implementation of universal health coverage in Indonesia. This study investigates the factors affecting profitability in an Indonesian pharmaceutical company after the national health insurance policy implementation.

Design/methodology/approach

This research is based on five independent variables (IVs) with six measurements that were empirically examined for their relationship with profitability. These variables are firm size (as measured by total sales), company efficiency (assets turnover), liquidity (current ratio), market power (the Lerner index) and a firm's growth (as measured by sales growth and sustainable growth rate). Data of ten pharmaceutical companies listed on the Indonesia Stock Exchange covering the period of 2014–2018 were extracted from companies' annual reports. Pooled ordinary least squares regression and fixed effects were used to analyze the data.

Findings

The findings show strong and positive relationships between liquidity and sustainable growth rate with profitability as measured by return on equity (ROE), return on assets (ROA) and earning per share (EPS), except EPS for liquidity. Further, both firm size and market power show positive significant relationships with ROA but negative significant relationships with EPS. Sales growth and company efficiency (as measured by assets turnover ratio) have no significant relationship with profitability.

Research limitations/implications

Due to data availability, the data include only listed pharmaceutical companies in the Indonesia Stock Exchange.

Practical implications

These results benefit internal users (such as managers, shareholders and employees). They can realize the determinants of enhancing the profitability of their company after the implementation of universal health coverage from the Indonesian government (JKN – Jaminan Kesehatan Nasional) since 2014. On the other side, other external users (such as investors, creditors, newly established pharmaceutical companies and tax authorities) also may get advantages of these results. It is clear that a significant impact happened upon this new policy implementation, and how an Indonesian pharmaceutical company will be profitable in the future. The relevance of company's business strategy (product and customer portfolio, competitor intelligence, etc.) with the profitability factors from this study can be further scrutinized as further consideration for both internal and external users.

Originality/value

This study differs from previous studies in many ways; first, it focuses on pharmaceutical companies in Indonesia. Previous studies have concentrated on different countries and companies in other sectors, such as services, banking and financial institutions or on industrial organizations. Second, this study analyzes the data from pharmaceutical companies' annual reports since 2014. There was a significant event of universal health coverage (national health insurance) implementation from the Indonesian government. Third, the study used ROE, ROA and EPS as indicators of profitability. Last but not least, the results of the study provide empirical evidence that firms with significant market power, good liquidity and well-managed sustainable growth rate improve operating income and ultimately enhance profitability.

Details

Journal of Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3585

Keywords

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Article

Ali Saleh Alarussi and Sami Mohammed Alhaderi

The purpose of this paper is to examine the factors affecting profitability in Malaysian-listed companies. It has been argued that profitability is the main pillar for any…

Abstract

Purpose

The purpose of this paper is to examine the factors affecting profitability in Malaysian-listed companies. It has been argued that profitability is the main pillar for any company to survive in the long run. Although profitability is the primary goal of all business ventures, scant attention has been paid to the factors that affect profitability in developing countries. This study investigates the factors affecting profitability in Malaysian-listed companies.

Design/methodology/approach

This research is based on five independent variables that were empirically examined for their relationship with profitability. These variables are: firm size (as measured by total sales), working capital (WC), company efficiency (assets turnover ratio), liquidity (current ratio) and leverage (debt equity ratio and leverage ratio). Data of 120 companies listed on Bursa Malaysia covering the period from 2012 to 2014 were extracted from companies’ annual reports. Pooled ordinary least squares regression and fixed-effects were used to analyze the data.

Findings

The findings show a strong positive relationship between firm size (total sales), WC, company efficiency (assets turnover ratio) and profitability. The results also show a negative relationship between both debt equity ratio and leverage ratio and profitability. Liquidity (current ratio) has no significant relationship with profitability.

Research limitations/implications

Due to the time limitation, the data includes only 120 companies listed in bursa Malaysia and covers the period from 2012 to 2014.

Practical implications

These results benefit internal users (such as mangers, shareholders and employees). They can realize the determinants of enhancing the profitability of their company after the depreciation of the Malaysian currency and therefore concentrate more on the factors that enhance their companies’ profitability. On the other side, other external users (such as investors, creditors, new established companies, tax authority) also may get advantages of these results. It is clear that those users concern about the profitability of companies and the determinants of their profitability after the currency’s depreciation.

Originality/value

This study differs than previous studies in many ways: first, it focuses on non-financial listed companies in Malaysia. Previous studies have concentrated on companies in the financial sector, such as banking and financial institutions or on industrial organizations. Second, this study analyzes the data in companies’ annual reports for a three-year period from 2012 to 2014. During this period, the economy in Malaysia was fluctuating due to currency depreciation. Third, the study used both return on equity and earnings per share as indicators of profitability. Fourth, the results of the study provide empirical evidence that large size firms with efficiently managed assets can improve operating income and ultimately enhance profitability. Last but not least, this study applies the resource-based theory and the trade-off theory.

Details

Journal of Economic Studies, vol. 45 no. 3
Type: Research Article
ISSN: 0144-3585

Keywords

Abstract

Details

Servitization Strategy and Managerial Control
Type: Book
ISBN: 978-1-78714-845-1

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Book part

Tuija Virtanen, Mari Tuomaala and Emilia Pentti

Purpose – The accounting literature has demonstrated increased concern over issues of sustainability. One of the most critical issues that corporations face at the moment…

Abstract

Purpose – The accounting literature has demonstrated increased concern over issues of sustainability. One of the most critical issues that corporations face at the moment is climate change. This especially concerns companies that are substantial consumers of materials and energy. Corporations have increasingly acknowledged that to address this issue the existing ways of managing business must be changed.

This study examines the challenges posed by measurement of energy efficiency performance in an energy-intensive industry. It covers the challenges encountered with respect to the energy efficiency indicator and its use as a management tool.

Methodology – The case study method was used to conduct the research, which took place in a single firm in an energy-intensive process industry.

Findings – The results indicate that the current energy efficiency indicator, specific energy consumption (SEC), does not meet the criteria for good performance measurement. In particular, the controllability of energy efficiency seems problematic. Another major challenge is target setting. Measurable targets are needed to identify and prioritise areas where consumption and emission can be reduced.

Practical implications – The study provides practical knowledge on what is happening in organisations that pursue sustainable development and in particular, environmental efficiency.

Originality/value – Although the conceptual challenges in energy efficiency measurement are well known in the technical literature, discussions dealing with its management have been few in number. This study is a cross-disciplinary work and combines technical energy efficiency literature and management accounting research on performance management.

Details

Performance Measurement and Management Control: Global Issues
Type: Book
ISBN: 978-1-78052-910-3

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Book part

Petri Suomala

The essential investments in new product development (NPD) made by industrial companies entail effective management of NPD activities. In this context, performance…

Abstract

The essential investments in new product development (NPD) made by industrial companies entail effective management of NPD activities. In this context, performance measurement is one of the means that can be employed in the pursuit of effectiveness.

Details

Managing Product Innovation
Type: Book
ISBN: 978-1-84950-311-2

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Article

Celik Parkan

This paper reports a study that was carried out to obtain comprehensive performance ratings to gauge the productive and service quality performance of a public transit…

Abstract

This paper reports a study that was carried out to obtain comprehensive performance ratings to gauge the productive and service quality performance of a public transit company using a recent performance measurement method called operational competitiveness rating (OCRA) analysis. The computed ratings incorporate the cost and revenue efficiency of operations, quality of service experience as perceived by commuters, and the quality of service delivery in specific areas measured internally. The ratings reflect the strategic priorities the company assigns to the financial and customer service implications of its operations. We demonstrate OCRA’s use as a diagnostic tool to examine a series of scenarios to construct performance profiles corresponding to different managerial priorities.

Details

International Journal of Operations & Production Management, vol. 22 no. 6
Type: Research Article
ISSN: 0144-3577

Keywords

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Article

Saurav Negi

The main aim of this paper is to develop a supply chain efficiency framework to improve overall business performance in the competitive era. This paper offers a critical…

Abstract

Purpose

The main aim of this paper is to develop a supply chain efficiency framework to improve overall business performance in the competitive era. This paper offers a critical literature review on supply chain efficiency that aims to reveal the basic research that has been carried out, the problem areas and requirements for the efficiency in the new era of the supply chain.

Design/methodology/approach

The methodology followed during this research involves beginning with a wide base of articles lying at the supply chain intersection, performance measurement topics, and then screening the list to concentrate on supply chain efficiency.

Findings

Findings show that supply chain efficiency in the modern era remains an open research field. This research contributes to the supply chain literature by clarifying the supply chain efficiency definition, defining key measurements and variables for supply chain efficiency and developing a supply chain efficiency framework to improve overall performance.

Practical implications

This study will be very useful to the scholars working in this field. The proposed framework would help researchers and academicians to understand every dimension and variable of supply chain efficiency, allowing practitioners to measure efficiency levels and identify improvement measures. This framework would also act as a comprehensive guide for future studies and business practices.

Originality/value

As there are several state-of-the-art review papers on various supply chain areas, there is a lack of literature available on supply chain efficiency studies that can provide a comprehensive framework for researchers on related literature. Thus, the present study seeks to bridge this gap in the supply chain literature. Also, this study will provide a strong basis for researchers and academicians to apply the supply chain efficiency measurement system to the dynamic supply chain.

Details

Management Research Review, vol. 44 no. 3
Type: Research Article
ISSN: 2040-8269

Keywords

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Book part

Md Nuruzzaman

The objective of this study is to investigate how country risk, different political actions from the government and bureaucratic behavior influence the activities in…

Abstract

The objective of this study is to investigate how country risk, different political actions from the government and bureaucratic behavior influence the activities in industry supply chains (SCs) in emerging markets. The main objective of this study is to investigate the influence of these external stakeholders’ elements to the demand-side and supply-side drivers and barriers for improving competitiveness of Ready-Made Garment (RMG) industry in the way of analyzing supply chain. Considering the phenomenon of recent change in the RMG business environment and the competitiveness issues this study uses the principles of stakeholder and resource dependence theory and aims to find out some factors which influence to make an efficient supply chain for improving competitiveness. The RMG industry of Bangladesh is the case application of this study. Following a positivist paradigm, this study adopts a two phase sequential mixed-method research design consisting of qualitative and quantitative approaches. A tentative research model is developed first based on extensive literature review. Qualitative field study is then carried out to fine tune the initial research model. Findings from the qualitative method are also used to develop measures and instruments for the next phase of quantitative method. A survey is carried out with sample of top and middle level executives of different garment companies of Dhaka city in Bangladesh and the collected quantitative data are analyzed by partial least square-based structural equation modeling. The findings support eight hypotheses. From the analysis the external stakeholders’ elements like bureaucratic behavior and country risk have significant influence to the barriers. From the internal stakeholders’ point of view the manufacturers’ and buyers’ drivers have significant influence on the competitiveness. Therefore, stakeholders need to take proper action to reduce the barriers and increase the drivers, as the drivers have positive influence to improve competitiveness.

This study has both theoretical and practical contributions. This study represents an important contribution to the theory by integrating two theoretical perceptions to identify factors of the RMG industry’s SC that affect the competitiveness of the RMG industry. This research study contributes to the understanding of both external and internal stakeholders of national and international perspectives in the RMG (textile and clothing) business. It combines the insights of stakeholder and resource dependence theories along with the concept of the SC in improving effectiveness. In a practical sense, this study certainly contributes to the Bangladeshi RMG industry. In accordance with the desire of the RMG manufacturers, the research has shown that some influential constructs of the RMG industry’s SC affect the competitiveness of the RMG industry. The outcome of the study is useful for various stakeholders of the Bangladeshi RMG industry sector ranging from the government to various private organizations. The applications of this study are extendable through further adaptation in other industries and various geographic contexts.

Details

Sustaining Competitive Advantage Via Business Intelligence, Knowledge Management, and System Dynamics
Type: Book
ISBN: 978-1-78441-764-2

Keywords

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Article

Radoslav Škapa and Alena Klapalová

The purpose of this paper is to explore whether Czech companies believe that value is being generated by reverse logistics (RL), and whether (and how) they track its costs…

Abstract

Purpose

The purpose of this paper is to explore whether Czech companies believe that value is being generated by reverse logistics (RL), and whether (and how) they track its costs and benefits. The quality of performance measurement of RL was related to three corporate attributes. The findings were then compared to the results of an older study to describe developments over the past five years, and to evaluate the changes during this time period.

Design/methodology/approach

This exploratory research is based on data from 102 Czech companies collected in 2009. The basic statistical tests were applied in the analysis. A part of the paper takes the form of longitudinal research.

Findings

One third of Czech companies surveyed reported that RL had a positive influence on their profits. A positive relationship between the profitability of RL activities and a company's strategic focus on RL was also identified. The level of interest by companies in performance measurement has increased; however, the companies tend to focus on the efficiency of RL while the effectiveness is neglected.

Research limitations/implications

Managers must acknowledge the issue of proper measurement of RL performance, and involve RL in the planning process if they want to improve it. They should focus more on effectiveness, not just on efficiency. The analyzed data express the opinions of executive management, and were not accompanied by financial or production data.

Originality/value

The survey first maps the status of RL performance measurement in the Czech Republic. It finds a relationship between profitability of RL and corporate planning, and it points out that companies focus mainly on RL efficiency, and fail to consider effectiveness in their performance measurement.

Details

Management Research Review, vol. 35 no. 8
Type: Research Article
ISSN: 2040-8269

Keywords

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