Study note on financial performance

Study note on financial performance

References with extracted contents

Walter Aerts and Ann Tarca (2010): Financial performance explanations and institutional setting, Accounting and Business Research, 40:5, 421-450.

"Consistent with prior research on the effects of accountability pressures on individual and organisational behaviour (e.g. Tetlock, 1999), we expect that environments with more regulation and monitoring and higher potential  itigation risk will lead to more detailed and formal explanations of performance which feature more consistent presentation traits and less self-serving bias";

"Numerous authors demonstrate a corporate tendency to attribute positive effects or outcomes in the annual reports to the company’s own actions or corporate origins (company strategy, decisions, know-how, human resources potential) and negative outcomes to external events or chance factors (business climate, inflation, market prices, government policy, weather) ..... This explanation style is considered as self-serving because situations and events are defined to the company’s own advantage";

Paquette, L.R. 2005. "Growth rates as measures of financial performance" Journal of Accounting Education 23, Elsevier: 67-78.

"Graphics are widely used by companies in their annual reports to highlight financial performance and to focus on change over time";

"This teaching note focuses on sales and earnings growth as financial performance measures. Many companies now report selected 3, 5, and 10 year growth rates in the financial highlights section of their annual reports";

"Penman (2003) argues that investors buy earnings and that they pay more for earnings growth. Although the growth rates of sales and earnings have emerged as valuable measures of financial performance, most accounting texts are deficient in showing students how to calculate these rates";

"In order to give financial information meaning, it must be put in a context that makes it meaningful. One way to do that is to look at information over time, so you know not only where the reporting entity stands at that point in time, but also how it got there";

Klingenberg, B., R. Timberlake, T.G. Geurts and R.J. Brown. 2013. "The relationship of operational innovation and financial performance - A critical perspective" International Journal of Production Economics 142, Elsevier: 317-323.

"The field of operations management experiences continuous innovations in the management of the production process. Long  established practices focus on the improvement of quality in general — such as Lean Manufacturing or Just-in-Time (JIT) and Total Quality Management (TQM). Recently environmental quality and sustainability have become the goals of Environmental Management Systems (EMS), or Lean Green Six Sigma. Managers interested in implementing one or any combination of these operational initiatives question whether the required investments ..... result in adequate returns. The academic literature provides various studies that analyze the impact of these methods on the performance of firms that have embraced them, often focusing specifically on financial performance measured by financial ratios, such as Return on Assets (ROA), Return on Equity (ROE) and profit margin, ..... Alternatively researchers build more sophisticated models that also include metrics of customer satisfaction and competitiveness, see for example Han et al. (2007). Data for these ratios are either obtained from financial reports of publicly traded firms or as perceptional data through surveys";

"Kinney and Wempe (2002) point out that ROA [Return on Asset] is the product of asset turnover (revenue/assets) and profit margin (net income/ revenue) i.e. ROA = AT [Asset Turnover] x PM [Profit Margin],  also called the Du Pont Equation  (Brigham  and Erhardt, 2011). One of the applications of the DuPont Equation is that it allows estimation of the effect of operating changes on returns (Brigham and Erhardt, 2011) by separating AT and PM";

Nair, G.K. 2014. "The influence of customer perceptions on financial performance in hospitality organizations: an empirical study" The Journal of Hospitality Financial Management 22, Routledge: 63-74.

"The influence of customer relationship orientation on financial performance has been a study of interest for the past several years, and the dimensions of these two constructs keeps growing (Sheth & Sisoda, 1999). Several researchers have proved the relationship of these two dimensions, particularly in the context of service industries ..... Owing to the importance of establishing the link between customer relationship and financial performance, groups of researchers have undertaken research in different streams such as establishment of causal relationships, exploration of intervening and moderating variables, strategies to  create customer values, and so forth .... ";

"Financial performance in the context of this research is a measure of a company’s ability to generate income over a given period of time (Lasher, 2010)";

"Financial performance:  Increase in earnings, reduce cash flow volatility, and increase cash flow residual value, thus potentially increasing firm value";

Payne, G.T., G.S. Benson and D.L. Finegold. 2009. "Corporate Board Attributes, Team Effectiveness and Financial Performance" Journal of Management Studies 46(4) June: 704-731.

"Boards have long been the subject of management research and the attention paid to corporate boards has increased substantially in recent years (Daily et al., 2003), with a particular focus on the board’s relationship to company performance (e.g. Pettigrew, 1992; Zahra and Pearce, 1989). Multiple theories have been used to explain and predict how boards affect company performance, including agency ( Jensen and Meckling, 1976), social network (Granovetter, 1985), stewardship (Davis et al., 1997), institutional (DiMaggio and Powell, 1983) and resource dependence...";

"The financial performance measure used in the model was a scale of three separate measures of returns: return on assets (ROA), earnings per share (EPS), and return on sales (ROS)";

José F. Molina-Azorín, Enrique Claver-Cortés, Maria D. López-Gamero, Juan J. Tarí, (2009),"Green management and financial performance: a literature review", Management Decision, Vol. 47 Iss: 7 pp. 1080 - 1100.

"Firms are facing growing pressure to become responsible and greener. Several stakeholders press companies to reduce their negative impacts on society and natural environment. In fact, social responsibility in general, and environmental management in particular, are becoming an integral part of firm activities. In this respect, an important issue is the relationship between these aspects and financial performance. However, from an entirely ethical and sustainability focused view, literature has argued that while there may not necessarily be a positive link between social responsibility and financial performance, it is still desirable from a society’s perspective that firms implement good social responsibility and environmental management practices";

"Financial performance variables: .... ROA, return on equity (ROE), total return to common shareholders (Compustat)...        ;  ROA, ROE, return on sales (ROS) (Compustat)...... ;   ROI, earnings growth, sales growth, market share change (perceptual measures)  ....;    Return on capital employed (ROCE), ROE  ";

Benner, M.J. and F.M. Veloso. 2008. "ISO 9000 practices and financial performance:  A technology coherence perspective" Journal of Operations  Management 25, Elsevier: 611-629.

".... we find that, as the majority of firms within an industry adopt ISO 9000, late adopters no longer gain financial benefits from these practices";