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The purpose of this paper is to analyze the management process considering risks and performances in developing new products.
Abstract
Purpose
The purpose of this paper is to analyze the management process considering risks and performances in developing new products.
Design/methodology/approach
The paper provides risk factors and performance factors based on literature reviews and then discusses risk and performance management processes during the product development period. Some lessons for effective risk management and performance measures are reported.
Findings
The timing of risk management and performance measures is important to the impact level of performance.
Practical implications
This proposed framework could be used as a basis for systematic management of R&D investment projects.
Originality/value
The paper provides insights into the R&D committee's role in developing new products.
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Joseph Calandro, Scott Lane and Ranganna Dasari
Risk management has grown increasingly popular in recent years due to the recognition that risk should be as actively managed as performance. A key objective of risk management is…
Abstract
Purpose
Risk management has grown increasingly popular in recent years due to the recognition that risk should be as actively managed as performance. A key objective of risk management is to evaluate performance in the context of the relative volatility in which business operations are undertaken. However, accomplishing this has generally proven difficult. This paper aims to present a practical approach for risk‐adjusting performance.
Design/methodology/approach
This paper presents a practical risk‐adjustment methodology that is based on a popular statistical measure. The utility of the approach is demonstrated in two practical examples: the first is an industry example and the second is an M&A example.
Findings
The results of the research suggest that the risk‐adjustment approach presented here could become an important part of both performance management and risk management programs.
Research implications/limitations
The approach detailed in this paper facilitates the practical risk‐adjustment of select performance measures and risk measures. As this is an introductory paper, further research could be conducted on the specifics of the risk‐adjustment process as well as the strategic context in which measures are risk‐adjusted.
Originality/value
This paper introduces a practical approach of risk‐adjusting performance that was inspired by a popular statistical measure, which is demonstrated in two practical examples.
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The purpose of this paper is to identify effects of prepayment risk on performance of commercial banks in the USA. Understanding how various risks impact banks' performance can…
Abstract
Purpose
The purpose of this paper is to identify effects of prepayment risk on performance of commercial banks in the USA. Understanding how various risks impact banks' performance can help to improve performance of financial institutions and better estimate risk premia charged by banks on the loans they extend to their customers.
Design/methodology/approach
The paper measures the prepayment risk premium and aims to gauge its effect on various ratios that measure bank performance. Since, risk management is an important goal of financial management, it is important to learn how prepayment risk pertains to bank performance.
Findings
The results of this paper suggest that prepayment risk may significantly impact return on loans, return on equity and real estate loans to total loans ratios of various commercial banks. The impacts, in terms of strength and direction, vary between the periods of pre‐ and post‐passage of the Financial Institutions Reform and Recovery Act. The results indicate that the addition of prepayment risk variable to regression models can generally increase their ability to explain bank performance metrics.
Originality/value
To the authors' knowledge, there is no existing literature that gauges the impact of prepayment risk on various components of bank performance. There is existing literature that shows that bank stocks move in response to prepayment risk.
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The novel coronavirus (COVID-19) has caused financial stress and limited their lending agility, resulting in more non-performing loans (NPLs) and lower performance during the II…
Abstract
Purpose
The novel coronavirus (COVID-19) has caused financial stress and limited their lending agility, resulting in more non-performing loans (NPLs) and lower performance during the II wave of the coronavirus crisis. Therefore, it is essential to identify the risky factors influencing the financial performance of Indian banks spanning 2018–2022.
Design/methodology/approach
Our sample consists of a balanced panel dataset of 75 scheduled commercial banks from three different ownership groups, including public, private and foreign banks, that were actively engaged in their operations during 2018–2022. Factor identification is performed via a fixed-effects model (FEM) that solves the issue of heterogeneity across different with banks over time. Additionally, to ensure the robustness of our findings, we also identify the risky drivers of the financial performance of Indian banks using an alternative measure, the pooled ordinary least squares (OLS) model.
Findings
Empirical evidence indicates that default risk, solvency risk and COVAR reduce financial performance in India. However, high liquidity, Z-score and the COVID-19 crisis enhance the financial performance of Indian banks. Unsystematic risk and systemic risk factors play an important role in determining the prognosis of COVID-19. The study supports the “bad-management,” “moral hazard” and “tail risk spillover of a single bank to the system” hypotheses. Public sector banks (PSBs) have considerable potential to achieve financial performance while controlling unsystematic risk and exogenous shocks relative to their peer group. Finally, robustness check estimates confirm the coefficients of the main model.
Practical implications
This study contributes to the knowledge in the banking literature by identifying risk factors that may affect financial performance during a crisis nexus and providing information about preventive measures. These insights are valuable to bankers, academics, managers and regulators for policy formulation. The findings of this paper provide important insights by considering all the risk factors that may be responsible for reducing the probability of financial performance in the banking system of an emerging market economy.
Originality/value
The empirical analysis has been done with a fresh perspective to consider unsystematic risk, systemic risk and exogenous risk (COVID-19) with the financial performance of Indian banks. Furthermore, none of the existing banking literature explicitly explores the drivers of the I and II waves of COVID-19 while considering COVID-19 as a dependent variable. Therefore, the aim of the present study is to make efforts in this direction.
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Ranjan D’Mello and Mercedes Miranda
We investigate the impact of the creation of a new incentive structure for CEOs resulting from firms introducing equity-based compensation (EBC) as a means of paying top…
Abstract
We investigate the impact of the creation of a new incentive structure for CEOs resulting from firms introducing equity-based compensation (EBC) as a means of paying top executives on policy decisions. Contrasting a firm’s stock and operating performance in the period the CEO is compensated with EBC (EBC period) and the period when EBC is not a component of the same executive’s pay (No EBC period) leads us to conclude that awarding stock options and restricted shares to executives is not associated with improved firm performance. However, firms initiate EBC after superior performance suggesting that CEOs are awarded compensation in this form as a reward for past performance. Firms have higher unsystematic and total risk levels in the EBC period suggesting EBC influences CEOs’ risk-taking behavior and reduces agency costs arising from managerial risk aversion. While there is no change in R&D expenses and cash ratios there is a decrease in capital expenditures in the EBC period, which is consistent with reduced overinvestment agency costs. Finally, leverage and payout ratios are similar in both periods implying that firms’ financing policy is not influenced by changes in CEOs’ compensation structure.
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Line Ettrich and Torben Juul Andersen
The world in which companies operate today is volatile, uncertain, complex, and ambiguous, thus subjecting contemporary forms to an array of risks that challenge their viability…
Abstract
The world in which companies operate today is volatile, uncertain, complex, and ambiguous, thus subjecting contemporary forms to an array of risks that challenge their viability in an increasingly competitive landscape. Organizations that cling to their traditional ways of operating impede their ability to survive while those able to embrace evolving changes and lever their strategic response capabilities (SRCs) will thrive against the odds. The possession of such capabilities has become a prominent explanation for effective adaptation to the impending changes but is rarely analyzed and tested empirically. Strategic adaptation typically assumes innovation as an important component, but we know little about how the innovative processes interact with the firm’s SRCs. Hence, this study investigates these implied relationships to discern their effects on organizational performance and risk outcomes. It explores the effects of SRCs and the role of innovation as intertwined adaptive mechanisms supporting strategic renewal that can attain superior performance and risk effects. The relationships are analyzed based on a large sample of US manufacturing firms over the decade 2010–2019. The study reveals that firms possessing effective SRCs have the ability to exploit opportunities and deflect risky situations to gain favorable performance and risk outcomes. While innovation indeed plays a role, the precise nature and dynamic effect thereof remain inconclusive.
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Hui Xu, Harry A. Taute, Paul Dishman and Jing Guo
The relationship between internationalization efforts of businesses and resulting performance has long been debated in the international marketing literature. Specially, under the…
Abstract
Purpose
The relationship between internationalization efforts of businesses and resulting performance has long been debated in the international marketing literature. Specially, under the environmental uncertainty, perception and experience of managers are important for internationalization performance.
Methodology/approach
This study proposes an integrated research framework and mechanism between perceived international risk and international marketing performance, adopting international experience as moderator variable and entry mode as mediating variable. Survey was conducted on 1,612 managers of 420 Chinese international enterprises by email and received 463 valid questionnaires.
Findings
The results show that there is a significant negative relationship between perceived international risk and international performance. Direct influence and perceived international risk have an indirect influence on international performance through entry mode; the influence on the international performance from perceived international risk is moderated by international experience, the regression coefficient between perceived international risk and international performance is the quadratic function of international experience.
Originality/value
Different from previous literature, this study found the complex relationship between risk and performance.
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John P. Koeplin and Pascal Lélé
Integrating interdisciplinary studies with Human Capital Management Accounting (HCMA) refers to the dynamics of organized interdisciplinary action that are transversal or…
Abstract
Integrating interdisciplinary studies with Human Capital Management Accounting (HCMA) refers to the dynamics of organized interdisciplinary action that are transversal or cross-cutting. This approach requires the mastery of a certain number of technical skills and disciplines, as well as the capacity to use them in a process to solve problems of financial performance. This is accomplished through the specific interaction tasks that are performed by each management function and operational unit, which act in real time with others, in the same direction as an organizational team, using a selected risk appetite threshold base.
Putting business fields side by side, (i.e., business disciplines silos, as is normally the case in MBA programs), is not enough to create the transversal interaction dynamic needed for firms to achieve expected financial performance goals. As a result, few graduates today have the cross-cutting or vertical skills required to act, in real time, from their workstation in accordance with the pyramid shape of the organization chart in order to create value.
This chapter presents the results of the interface established by a faculty member in the Accounting Department of the University of San Francisco with a “seasoned leader in the FinTech industry.” It proposes a single portal for employers and HRMs to which the continuing education services of professional training associations, executive education departments of colleges, and MBA schools and universities, can connect to issue the HCMA certificate supplementing their training offerings focused on “Leadership Development”.
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Darja Peljhan, Danijela Miloš Sprčić and Mojca Marc
Our study investigates the relationships between risk management systems (RMS), strategy and organizational performance. The existing research has extensively studied the effect…
Abstract
Our study investigates the relationships between risk management systems (RMS), strategy and organizational performance. The existing research has extensively studied the effect of strategy on organizational performance. There is also a growing body of literature suggesting that RMS positively influence the achievement of organizational objectives. However, there are only a few conceptual papers (and no empirical evidence) on the relationship between strategy and RMS. We investigate whether different strategy types (defender, analyzer, prospector, and reactor) induce different levels of RMS development and, hence, affect performance indirectly, as well as directly. We use regression analysis and survey data to test the proposed relationships. Our results confirm the direct effects of strategy type and RMS development on performance. We confirm that prospectors perform better than defenders, analyzers, and reactors across five measures of performance (profitability, sales growth, market share, new product development, and customer satisfaction). We also find that companies with more developed RMS perform better in terms of non-financial performance (measured by new product development). Contrary to the prevailing evidence, we do not find significant results for financial performance. Moreover, our findings show that there is no mediating effect of RMS development in the relationship between strategy type and performance. This implies that RMS and strategy act as independent variables, each individually affecting organizational performance.
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