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The performance effects of product‐market and international diversification were examined in a sample of 156 U.S. corporations. Three sets of performance measures were used: (1) profitability, (2) risk‐adjusted returns, and (3) growth. Results suggest independent effects on profitability, and interactive effects on risk‐adjusted returns and growth. Results also clarify seemingly conflicting findings on product‐market and international diversification effects on performance.

This study aims to investigate growth differentials among small islands and the impact of tourism specialization on the growth and the economic performance of small islands.

The study is based on trade theory and uses data from a panel of small islands for 1995-2007. It applies panel regression and standard time series methods combined with a qualitative approach.

Small islands experienced stronger basic patterns of growth than many developed countries, especially where economies of scale are not an issue. The findings further suggest that tourism specialization is not harmful to growth, and, in lieu of technological gaps and resource limitations, tourism specialization is a sound option. Size, a lack of complete sovereignty or independence and export orientation do not seem to affect the variance in the real per capita GDP at a greater degree. Finally, small islands may leverage returns to scale in global markets.

While tourism specialization is assumed to enhance growth, in the case of small island destinations, the study did not formally test whether increased terms-of-trade may be perpetually improved.

The study prompted four policy suggestions: small island economies should engage in tourism specialization; small island economies should allocate more resources to the tourism industry than other economic sectors; the success of tourism specialization does not depend exclusively on comparative advantage; and institutional realities and path dependence may play a role in economic performance.

The originality of this study lies in the detection of a paradox in mainstream economics that indicates that small islands may not enjoy sustained economic growth. The detection led to a surprising discovery that tourism specialization may propel growth. The value of the study is twofold: theoretical value is added by suggesting a reconceptualization of the construct capital; and, practical value is strengthened in the sense that tourism specialization may only work under a condition where upon tourism offerings command higher prices than other commodities.

Built upon theories from outside the construction management literature, this study assesses the impact of product diversification on the performance of construction firms in the UK. Performance was measured based on financial ratios of management performance while diversification was measured by the specialisation ratio. The research involved the use of financial data of construction firms covering the period 1995‐2004. The choice of the period is informed by the economic stability during the period and also, by the fact that diversification is a long‐term strategy. The findings indicate that focused firms outperform both moderately and highly diversified firms based on return on total assets (ROTA) and profit margin (PM). However, no performance difference was found between the moderately diversified and highly diversified firms.

Sustainability assurance services are carried out in a competitive market where a wide range of assurance providers operate without the need for any specific professional qualifications, competencies or skills. Assurance providers have heterogeneous professional backgrounds and experiences that lead to substantial diversity in sustainability assurance quality levels. This paper aims to provide an understanding of sustainability assurance quality. From a legitimacy perspective, the authors focus on the choice of assurance providers by exploring why a company voluntarily chooses an incumbent financial auditor to jointly provide audit and sustainability assurance services. The authors argue that to avoid the legitimacy threats undermining stakeholders’ confidence in the sustainability information disclosed, companies should only choose their incumbent financial auditors to provide sustainability assurance services when these auditors possess the professional attributes associated with sustainability assurance quality.

This study develops regression models for an international sample for 2007–2016, where the authors analyze why a company voluntarily chooses an incumbent auditor to jointly provide audit and sustainability assurance services from a legitimacy theory perspective.

Evidence confirms that the choice of incumbent auditors as assurance providers is more likely when these providers are more specialized in the industry. The authors also find that independence does not play a significant role in this decision. Therefore, an assurance provider’s industry specialization can be understood as an attribute that is associated with sustainability assurance quality and one which limits the legitimacy threats caused by a lack of sufficient sustainability knowledge.

Given that companies have complete freedom when choosing their assurance providers, the selection of a high-quality incumbent auditor is an indirect measure of social commitment and a mechanism to improve public trust. The results confirm that it is fundamental for firms to understand the situations when choosing an incumbent financial auditor to provide sustainability assurance services is the best way to ensure firm legitimacy while obtaining higher sustainability assurance quality due to the spillover effect. This paper provides useful evidence for firms and managers who can become aware that the legitimacy threat associated with the auditing profession’s questionable competence to conduct efficient sustainability assurance engagements can be reduced if they hire an incumbent financial auditor with greater industry specialization. For assurance providers, the results are especially useful, as they should know that companies will be more likely to choose their incumbent financial auditor when that auditor possesses certain professional attributes, like industry specialization. The ability to assimilate and exploit the knowledge gained through auditing activities can be improved even more by specialization, which enhances sustainability assurance quality.

From a social perspective, stakeholders perceive industry specialization as an indicator of the professional skills necessary to increase both the real and perceived quality of sustainability assurance services, thereby limiting the legitimacy threat arising from a lack of sustainability knowledge. The evidence also provides valuable results for regulatory bodies, as it shows that firms are not able to address the legitimacy gap caused by stakeholders’ perceptions that incumbent financial auditors can easily be controlled by companies. Thus, doubts arise as to whether this joint provision undermines auditor independence. Precisely, these doubts about assurance provider independence can erode public confidence in assurance and devalue the quality of the service. The results of this paper highlight the need to strengthen regulation on sustainability reporting and assurance. The advances and relevance of sustainable development in recent years and in future agendas require a firm commitment to sustainability reporting and assurance of quality, reliability, integrity and confidence.

First, this study contributes to recent empirical studies that focus on the role of sustainability assurance services in the legitimation process of corporate sustainability reporting. However, while that research analyzes how the legitimacy theory explains the voluntary adoption of sustainability assurance, this paper adds to the literature by presenting evidence about why certain incumbent auditors are appointed to carry out sustainability assurance services. Second, this paper contributes to the sustainability assurance quality literature. Third, unlike previous studies that have regressed various client-specific and institutional factors that influence firms’ decisions to choose assurance providers, this study contributes to the research by providing knowledge about a set of professional features that may explain the decision model of assurance providers selection from a legitimacy perspective.

The purpose of this paper is to examine the link between service specialization and operational performance in hospitals. Existing literature has mostly been concerned with the performance effects of operational focus, which can be seen as an extreme form of specialization. It is not clear, however, whether an effect similar to the focus effect can be observed also in cases where specialization takes on less extreme forms. The authors analyze this effect up to and above the effects of volume, learning and patient selection.

Ordinary least squares (OLS) and two‐stage regression models were used to analyze patient data from 142 Austrian hospitals over the 2002‐2006 period. The sample contains 322,193 patient groups (841,687 patient group‐year observations).

The authors find that increased specialization in a service leads to a more efficient provision of this service in terms of shorter length of stay. The analysis shows that this effect holds even after controlling for volume, learning, and patient selection effects. The authors suggest that the pure specialization effect is due to the increased administrative and medical attention that is given to a service when the relative importance of that service increases.

The paper's results indicate hospital managers should pay attention to the impact of specialization when making service‐mix decisions. If two services have the same or a similar level of operational performance, then this does not mean that hospital managers should be indifferent as to the relative volume of these services.

The paper provides additional insights into the impact of service‐level specialization not examined in prior literature.

The distinctive feature of Islamic financial intermediation is its foundation on profit-and-loss sharing which reinforces solidarity and fraternity between partners. Thus, the bank margin and its determinants may differ between Islamic and conventional banks (CBs). The purpose of this paper is to empirically assess the main factors that explain the bank margin in a panel of Islamic and CBs operating in the Middle East and North Africa (MENA) region. This study will permit to identify the common and the specific determinants of the intermediation margins in dual banking systems.

The authors use a dynamic panel approach. The empirical analysis is carried out for a sample of 50 Islamic banks (IBs) and 126 CBs from 14 MENA countries.

The results reveal that net profit margins of IBs may be explained for the most part by risk aversion, inefficiency, diversification and economic conditions. With regard to CBs, their margins depend positively on market concentration and risk aversion and negatively on specialization, diversification, inefficiency and liquidity.

The significant impact of the degree of diversification on margins suggests that any policy analysis of the pricing behavior of banks should rely on its whole output. The high levels of margins in Islamic and CBs based in the MENA region may represent an obstacle to these countries to pursue their development process. Thus, policy makers in these countries should consolidate the role of capital markets and nonbanking financial institutions to provide alternative sources of funding and stimulate more competition.

The positive relationship between concentration and net interest margins requires that policy makers should create competitive conditions if they want to lower the social cost of financial intermediation. The creation of competitive conditions may be achieved through encouraging the establishment of new domestic banks or the penetration of foreign banks.

The present study aims to contribute to the existing literature on the determinants of bank margins in three ways. First, the authors identify the factors that most explain bank margins for both conventional and IBs. The majority of previous studies examine the determinants of the profitability or the overall performance of banks and in particular conventional ones. Second, this paper employs two generalized method of moments (GMM) approaches introduced by Arellano and Bover (1995) and Arellano and Bond (1991). It differs from Hutapea and Kasri (2010) who employed the co-integration technique to examine the long-run relationship between Islamic and CB margins and their determinants in Indonesia. Third, unlike previous studies focusing on MENA region that use a small number of countries and a short sample period, the period of study covers 16 years from 1999 to 2014 and a large sample of countries (14 countries). This paper differs from Lee and Isa (2017) who applied the dynamic two-step GMM estimator technique introduced by Arellano and Bond (1991) to study the determinants of intermediation margins of Islamic and CBs located in Malaysia.

The purpose of this paper is to analyze the impact of macroeconomic‐industrial and bank‐specific factors on Latin American banks’ performance.

Using the data panel system estimator version of the generalized method of moments, the authors estimate the determinants of return on assets and interest margin for a sample of 78 commercial banks from Argentina, Brazil, Chile, Colombia, México, Paraguay, Peru, and Venezuela over the period from 1995 to 2010.

On the one hand, the results show that bank performance is positively related to both idiosyncratic factors, such as service diversification, size, capital ratio, and specialization degree, and to macroeconomic‐industrial factors such as economic growth, inflation, and bank concentration. On the other hand, the results show that bank performance is negatively related to credit risk, liquidity risk, and operational inefficiencies.

The authors provide new evidence from the Latin American bank industry and incorporate the effect of diversification through noninterest activities.

Industrial development in ASEAN is closely related to structural changes and industrial adjustments taking place in the industrial countries and the other developing economies in the Asia‐Pacific region. Some activities which have been edged out or phased out in the process of industrial restructuring in Japan and the NICs have migrated to the ASEAN member countries through foreign direct investment channels. Therefore, this paper aims to examine the “flying geese” paradigm and discusses the extent to which this pattern has generated a mutually reinforcing, harmonious process of industrialisation in ASEAN.

This paper investigates the relationship between audit quality (as measured by auditor size and industry specialization) and earnings management (as measured by unexpected accruals) for Taiwan IPO firms.

First uses unexpected accruals in the modified Jones model to measure earnings management in the IPO process. Then uses auditor type (big five versus non‐big five) and industry specialist to measure audit quality. The hypothesis predicts that Taiwanese firms with higher quality auditors engage less in earnings management in the IPO process. The sample consists of 367 new issues between 1999 and 2002 from the Taiwan Economic Journal database.

It is found that big five auditors are related to less earnings management in the IPO year in Taiwan. This shows that higher quality auditors constrain earnings management for Taiwan IPO firms.

The finding shows that high quality auditors constrain earnings management and provide more precise information. This is important, given that management has incentive to engage in earnings management in the IPO process to garner greater proceeds and at‐issue earnings management is negatively related to post‐issue earnings performance and stock returns.

The research might be of interest to investors in IPO firms, given that at‐issue unexpected accruals are opportunistic.

The study contributes to the literature in that it shows that audit firm size is an important determinant in earnings management for Taiwan IPO firms.