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Article
Publication date: 23 August 2013

Ioanna Keramidou, Angelos Mimis, Aikaterini Fotinopoulou and Chrisanthos D. Tassis

This paper aims to identify the relationship between efficiency and profitability by using data from Greek meat processing companies over the period 1994‐2007.

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Abstract

Purpose

This paper aims to identify the relationship between efficiency and profitability by using data from Greek meat processing companies over the period 1994‐2007.

Design/methodology/approach

The relationship of efficiency and profitability is studied, by applying a new performance decomposition model. This method is capable of making valid and consistent inferences about the performance of a two‐stage production system, as well as the main sources of inefficiencies within a company.

Findings

A poor performance over the study period is observed in the sample companies. The low performance is mainly due to the low profitability. The results do not confirm the existence of a positive strong correlation between efficiency and profitability. The companies that have the capability of producing their products with the best practices are not always capable of generating the maximum profits.

Practical implications

The need for the improvement of performance has two aspects: first, it is a demand for the effective use of resources, and simultaneously, it is an urgent requirement for the generation of profits. According to the study findings, the long‐term survival of firms in our sample seems to require adopting mainly profitability‐enhancing strategies.

Originality/value

This paper provides one of the first evaluations of performance focusing on efficiency and profitability, by applying an innovative performance decomposition approach that has not yet been applied in Greek industries.

Details

Benchmarking: An International Journal, vol. 20 no. 5
Type: Research Article
ISSN: 1463-5771

Keywords

Article
Publication date: 4 November 2020

Zulkifli Rangkuti

This paper aims to examine the effects of Tier-1 capital toward risk management and profitability on the performance of Indonesian Commercial Banks.

Abstract

Purpose

This paper aims to examine the effects of Tier-1 capital toward risk management and profitability on the performance of Indonesian Commercial Banks.

Design/methodology/approach

The research population consisted of all commercial banks listed on the Indonesia Stock Exchange. The data were in the form of financial statements of commercial banks for the periods of 2012 to 2016 with a total of 42 companies (bank). From a total of 42 commercial banks listed in the Indonesia Stock Exchange, not all of them met the criteria. Commercial banks that meet these criteria are as many as 28 banks are sampled research.

Findings

Tier-1 capital has a positive direct effect on risk management, Tier-1 capital has a positive indirect effect on profitability with risk management as a mediation variable, risk management has a positive direct effect on profitability, Tier-1 capital has a positive indirect effect on performance with risk management and profitability as mediation variables, risk management has a positive indirect effect on performance with as mediation variable and profitability has a positive impact on performance.

Originality/value

The originality of this research can be seen from the causal relationship between the effects of Tier-1 capital, risk management and profitability on the performance of commercial banks in the context of stock performance among Indonesia commercial banks. Also, the analysis tools using multiple fixed effect panel data models in this research as a novelty in this research. In addition, previous research findings remain inconsistent with one another. By conducting this research, it is expected that more consistent research findings than the previous ones can be generated. Sluggish global economic conditions, which result in declined bank performance are an interesting topic to investigate. The paper uses an original sample, 28 Indonesian banks in 2012-2016. Also, it links Tier 1 capital with risk management and performance in a novel theoretical framework.

Details

Measuring Business Excellence, vol. 25 no. 2
Type: Research Article
ISSN: 1368-3047

Keywords

Article
Publication date: 22 June 2010

Ioannis E. Tsolas

The purpose of this paper is to provide a framework for evaluating the overall performance of bank branches in terms of profitability efficiency and effectiveness.

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Abstract

Purpose

The purpose of this paper is to provide a framework for evaluating the overall performance of bank branches in terms of profitability efficiency and effectiveness.

Design/methodology/approach

Applying a two‐stage DEA model to a sample of bank branches of a large commercial bank in Greece this study disaggregates overall performance into profitability efficiency and effectiveness.

Findings

The results indicate that superior insights can be obtained by employing the proposed two‐stage DEA model compared to the outcomes from the analysis based on selected key performance indicators (KPIs). Some relations between profitability efficiency and effectiveness are also investigated.

Originality/value

The study highlights the importance of encouraging increased profitability and efficiency throughout the branch network of the commercial bank under study.

Details

International Journal of Productivity and Performance Management, vol. 59 no. 5
Type: Research Article
ISSN: 1741-0401

Keywords

Article
Publication date: 22 June 2018

Sumit K. Majumdar and Arnab Bhattacharjee

Literature, spanning industrial organization and strategic management disciplines, uses variance decomposition to understand the relative importance of firm, industry and business…

Abstract

Purpose

Literature, spanning industrial organization and strategic management disciplines, uses variance decomposition to understand the relative importance of firm, industry and business group effects in shaping profitability variations. Some literature analyzes firm profitability under transition to liberalization. Previous research has taken a static before-and-after view on institutional change. This paper aims to focus on the dynamic process of liberalization in India, analyzing how different institutional regime changes alter firm behavior leading to changes in profitability patterns.

Design/methodology/approach

Based on a panel data set of several thousand Indian firms, spanning the 26-year period between 1980-1981 and 2005-2006, the authors determine the relative importance of firm, industry and business group effects in explaining manufacturing firms’ profitability variances across different institutional phases. The authors evaluate three propositions that help assess transition dynamics between phases. They determine the quantum of catch-up or falling behind by firms.

Findings

Different industries emerge as profitability leaders, as the economy progresses through different liberalization phases. Business groups that have been more effective in resource appropriation, rent-seeking, politician management and non-market activities in a controlled regime are replaced as profit leaders by those that, in a free-market economy, can be capable of intra-business resource allocation tasks and leveraging corporate capabilities.

Originality/value

The approach demonstrates how to analyze the underlying detailed structure of firm-level data, and performance outcomes, to derive nuanced interpretation of factors giving rise to the effects that explain profitability variances, and how to assess the way these effects behave over time. The dynamic evidence-based approach highlights what factors matter, where, when and why, in influencing profitability variances, which are a key dimension of industrial and economic performance.

Details

Indian Growth and Development Review, vol. 11 no. 2
Type: Research Article
ISSN: 1753-8254

Keywords

Abstract

Details

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

Article
Publication date: 10 September 2018

Erna Sari, Suhadak, Sri Mangesti Rahayu and Solimun

This research aims to examine the effect of Tier-1 capital, risk management, and profitability on performance of Indonesia commercial banks.

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Abstract

Purpose

This research aims to examine the effect of Tier-1 capital, risk management, and profitability on performance of Indonesia commercial banks.

Design/methodology/approach

The research population consisted of all commercial banks listed in the Indonesia Stock Exchange periods of 2010 to 2014 with a total of 42 companies. The statistical analysis for testing the hypothesis using structural equation modeling (SEM) covariance based using WarpPLS.

Findings

Research result shows that Tier-1 capital has a positive effect on capital on risk management; risk management has a positive effect on performance, but risk management does not have an effect to profitability; profitability has a positive effect on performance; and Tier-1 capital has a negative effect on profitability. On the other hand, profitability has a negative effect on Tier-1 capital and performance has a positive effect on Tier-1 capital, whereas Tier-1 capital does not have an effect on performance.

Originality/value

The originality of this research can be seen from the causal relationship between the effects of Tier-1 capital, risk management and profitability on performance of commercial banks in the context of stock performance among Indonesia commercial banks. In addition, previous research findings remain inconsistent between one another. By conducting this research, it is expected that more consistent research findings than the previous ones can be generated. Sluggish global economic conditions which result in declined bank performance are an interesting topic to investigate.

Details

International Journal of Law and Management, vol. 60 no. 5
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 7 September 2010

Mahour Mellat Parast and Elham (Ellie) H. Fini

This study aims to investigate the effect of productivity and quality on profitability in the US airline industry.

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Abstract

Purpose

This study aims to investigate the effect of productivity and quality on profitability in the US airline industry.

Design/methodology/approach

Airlines operations and performance data were used to determine the effect of productivity and quality on profitability. Correlation and multivariate regression analysis have been used for data analysis.

Findings

The results show that labor productivity is the most significant predictor of profitability. On‐time performance has no relationship with profitability. The findings suggest that labor productivity, gas price, average annual maintenance cost and employee salary are significant predictors of profitability. The relationship between labor productivity and employee salary with profitability is positive, while gas price and average annual maintenance cost have a negative relationship with profitability.

Research limitations/implications

The research could be more detailed by taking into account measures of airline safety. Additional measures for service quality could be considered.

Practical implications

Operational performance (labor productivity) is the main source of profitability in the US airline industry followed by customer satisfaction and service quality.

Originality/value

The study captures the performance of the airline industry based on longitudinal data from 1989 to 2008. Previous studies have used either quarterly or monthly observations. Second, the study examines the significance of productivity and quality on profitability. Previous studies have provided little insight regarding the effect of productivity and quality on profitability.

Details

Managing Service Quality: An International Journal, vol. 20 no. 5
Type: Research Article
ISSN: 0960-4529

Keywords

Article
Publication date: 2 September 2014

Lama Tarek Al-Kayed, Sharifah Raihan Syed Mohd Zain and Jarita Duasa

This paper aims to examine the effect of capital structure on Islamic banks’ (IBs) performance to provide guidance to finance managers for raising capital funds. As newcomers to…

7290

Abstract

Purpose

This paper aims to examine the effect of capital structure on Islamic banks’ (IBs) performance to provide guidance to finance managers for raising capital funds. As newcomers to the markets, IBs are facing a trade-off. They can either use high capital ratios which increase the soundness and safety of the bank and lower the required return by investors, or depend on deposits and Islamic bonds which are considered cheaper sources of funds due to their tax rebate. An IB’s management must carefully decide the appropriate mix of debt and equity, i.e. capital structure, to maximize the value of the bank.

Design/methodology/approach

Using a sample of 85 IBs covering banking systems in 19 countries, the study uses a two-stage least squares method to examine the performance determinants of IBs to control the reverse causality from performance to capital structure.

Findings

After control of the macroeconomic environment, financial market structure and taxation, results indicate that IBs’ performance (profitability) responds positively to an increase in equity (capital ratio). The result is consistent with the signaling theory which predicts that banks expected to have better performance credibly transmit this information through higher capital. Optimal capital structure results of the IBs found a non-monotonic U-shaped relationship between the capital-asset ratio and profitability, supporting the efficiency risk and franchise value hypotheses.

Research limitations/implications

Due to limitations for market data, the study uses book accounting ratios. Future research where market data are available could use performance measures, such as Tobin’s Q in performance determinants models.

Practical implications

The non-monotonic relationship found between IBs’ return on equity and capital ratios suggests that equity issuances for IBs’ with low capital ratios (lower than the turning point of 37.41 per cent) are expensive and have a negative effect on their profitability. On the other hand, managers of well-capitalized IBs (banks with capital ratios beyond 37.41 per cent) are advised to rely on equity when faced by a decision to raise capital, as the capital ratio starts to affect their profitability positively.

Originality/value

Islamic banking literature has been silent on IBs’ capital structure and its relevance; this study will try to fill in the existent gap.

Details

Journal of Islamic Accounting and Business Research, vol. 5 no. 2
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 3 June 2020

Christopher A. Wolf, J. Roy Black and Mark W. Stephenson

The purpose of this research is to understand US Upper Midwest dairy farm profitability performance over time and across herd size. Profitability is broken down into asset…

Abstract

Purpose

The purpose of this research is to understand US Upper Midwest dairy farm profitability performance over time and across herd size. Profitability is broken down into asset efficiency and operating profit margin. The primary objective is to determine how much information is required to accurately benchmark farm performance.

Design/methodology/approach

Financial ratios to measure profitability (rate of return on assets), profit margin (operating profit margin ratio), and asset efficiency (asset turnover) were collected from Michigan State University and the University of Wisconsin business analysis programs for dairy farms from 2000 through 2016. Financial ratio patterns were examined both across time and herd size. Annual distributions were divided into quartiles and the use of one to five-year averages were used to determine accuracy of quartile rank compared to true long-run farm profitability performance.

Findings

Financial performance across large herds was more uniform than across smaller herds. Small and large herd profitability performance converged in poor years but diverged in good years. Using three or more years performance greatly improved accuracy of benchmarking profitability.

Originality/value

The data utilized are very rich in the sense of the amount of variation across years and herd size. The results have important implications for farm financial management and benchmarking farm financial performance. Farm firms should benchmark multiple years of profitability before making major management changes to alleviate deficiencies.

Details

Agricultural Finance Review, vol. 80 no. 5
Type: Research Article
ISSN: 0002-1466

Keywords

Open Access
Article
Publication date: 27 October 2023

Ivo Hristov, Matteo Cristofaro and Riccardo Cimini

This study aims to investigate the impact of stakeholders’ nonfinancial resources (NFRs) on companies’ profitability, filling a significant gap in the literature regarding the…

Abstract

Purpose

This study aims to investigate the impact of stakeholders’ nonfinancial resources (NFRs) on companies’ profitability, filling a significant gap in the literature regarding the role of NFRs in value creation.

Design/methodology/approach

Data from 76 organizations from 2017 to 2019 were collected and analyzed. Four primary NFRs and their key value drivers were identified, representing core elements that support different dimensions of a company’s performance. Statistical tests examined the relationship between stakeholders’ NFRs and financial performance measures.

Findings

When analyzed collectively and individually, the results reveal a significant positive influence of stakeholders’ NFRs on a firm’s profitability. Higher importance assigned to NFRs correlates with a higher return on sales.

Originality/value

This study contributes to the literature by empirically bridging the gap between stakeholder theory and the resource-based view, addressing the intersection of these perspectives. It also provides novel insights into how stakeholders’ NFRs impact profitability, offering valuable implications for research and managerial practice. It suggests that managers should integrate nonfinancial measures of NFRs within their performance measurement system to manage better and sustain companies’ value-creation process.

Details

Management Research Review, vol. 47 no. 13
Type: Research Article
ISSN: 2040-8269

Keywords

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