Financial performance under influence of credit risk in non-financial firms: evidence from Pakistan

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Mushafiq ◽  
Muzammal Ilyas Sindhu ◽  
Muhammad Khalid Sohail
Keyword(s):  
Credit Risk ◽  
Financial Performance ◽  
Firm Size ◽  
Banking Sector ◽  
Stock Exchange ◽  
Least Square ◽  
Content Type ◽  
Financial Firms ◽  
Score Model ◽  
The Relationship

PurposeThe main purpose of this study is to examine the relationship between credit risk and financial performance in non-financial firms.Design/methodology/approachIn order to test the relationship between Altman Z-score model as a credit risk proxy and the Return on Asset and Equity as indicator for financial performance with control variables leverage, liquidity and firm size. Least Square Dummy Variable regression analysis is opted. This research's sample included 69 non-financial companies from the Pakistan Stock Exchange KSE-100 Index between 2012 and 2017.FindingsThis study establishes the findings that Altman Z-score, leverage and firm size significantly impact the financial performance of the KSE-100 non-financial firms. However, liquidity is found to be insignificant in this study. Altman Z-score and firm size have shown a positive relationship to the financial performance, whereas leverage is inversely related.Practical implicationsThis study brings in a new and useful insight into the literature on the relationship between credit risk and financial performance. The results of this study provide investors, businesses and managers related to non-financial firms in the KSE-100 index with significant insight about credit risk's impact on performance.Originality/valueThe evidence of the credit risk and financial performance on samples of non-financial firms has not been studied; mainly it has been limited to the banking sector. This study helps in the evaluation of Altman Z-score's performance in the non-financial firms in KSE-100 index as well.

Merton-type default risk and financial performance: the dynamic panel moderation of firm size

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Muhammad Mushafiq ◽  
Syed Ahmad Sami ◽  
Muhammad Khalid Sohail ◽  
Muzammal Ilyas Sindhu
Keyword(s):  
Financial Performance ◽  
Firm Size ◽  
Default Risk ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Dynamic Panel Data ◽  
Dynamic Panel ◽  
Content Type ◽  
Nonfinancial Firms ◽  
The Relationship

PurposeThe main purpose of this study is to evaluate the probability of default and examine the relationship between default risk and financial performance, with dynamic panel moderation of firm size.Design/methodology/approachThis study utilizes a total of 1,500 firm-year observations from 2013 to 2018 using dynamic panel data approach of generalized method of moments to test the relationship between default risk and financial performance with the moderation effect of the firm size.FindingsThis study establishes the findings that default risk significantly impacts the financial performance. The relationship between distance-to-default (DD) and financial performance is positive, which means the relationship of the independent and dependent variable is inverse. Moreover, this study finds that the firm size is a significant positive moderator between DD and financial performance.Practical implicationsThis study provides new and useful insight into the literature on the relationship between default risk and financial performance. The results of this study provide investors and businesses related to nonfinancial firms in the Pakistan Stock Exchange (PSX) with significant default risk's impact on performance. This study finds, on average, the default probability in KSE ALL indexed companies is 6.12%.Originality/valueThe evidence of the default risk and financial performance on samples of nonfinancial firms has been minimal; mainly, it has been limited to the banking sector. Moreover, the existing studies have only catered the direct effect of only. This study fills that gap and evaluates this relationship in nonfinancial firms. This study also helps in the evaluation of Merton model's performance in the nonfinancial firms.

scholarly journals Do work-life balance practices mediate in the relationship between female participation and financial performance?

2018 ◽  
Vol 27 (3) ◽  
pp. 249-265 ◽  
Author(s):  
María Dolores Odriozola ◽  
Elisa Baraibar-Diez
Keyword(s):  
Financial Performance ◽  
Stock Exchange ◽  
Work Life ◽  
Work Life Balance ◽  
Family Responsibilities ◽  
Life Balance ◽  
Female Participation ◽  
Content Type ◽  
Participation Of Women ◽  
The Relationship

PurposeThe purpose of this paper is to analyse the relationship between the participation of women in companies with financial performance. However, this relationship does not arise directly. The authors argue that the participation of women in the company’s staff has a positive effect on the creation of work-life balance (WLB) practices, due to women have traditionally assumed family responsibilities, and subsequently these practices positively affect financial performance. WLB practices are a tool to balance employees’ professional and personal goals.Design/methodology/approachThis study aims to determine whether WLB practices mediate in the relationship between female participation in the workforce and financial performance on large companies listed in the Spanish Stock Exchange Index during the period from 2008 to 2013.FindingsThe main finding is that female participation in the workforce positively affects to the availability of WLB practices, but WLB practices are not a mediator to increase financial performance.Originality/valueThe study is a new contribution for academics and practitioners, since the WLB has a role of moderating variable; and the positive joint effect of female participation and WLB practices is tested over the company’s outcomes, instead of over the individual employee behaviour like in previous literature. In addition, this effect is studied in a country with economic recession where corporate WLB practices have increased in the last decade.

scholarly journals RELATIONSHIP BETWEEN FAMILY OWNERSHIP, AGENCY COSTS TOWARDS FINANCIAL PERFORMANCE AND BUSINESS STRATEGY AS MEDIATION

2018 ◽  
Vol 19 (0) ◽  
pp. 49-58
Author(s):  
Enni Savitri
Keyword(s):  
Financial Performance ◽  
Business Strategy ◽  
Agency Costs ◽  
Stock Exchange ◽  
Partial Least Square ◽  
Least Square ◽  
Business Strategies ◽  
Family Ownership ◽  
Manufacturing Companies ◽  
The Relationship

This study investigates the relationship between family ownership, agency costs, financial performance, and companies’ business strategies. The targeted population of this study were all 143 manufacturing companies listed on the Indonesia Stock Exchange (IDX) during 2007–2014. About 31% (45) of these manufacturing companies are family companies. The hypotheses were tested using the partial least-square (PLS) method. Our findings reveal that the companies’ business strategies are not affected by the family ownership. Family ownership and business strategies influence companies’ financial performance. Agency costs influence business strategy and financial performance, and this shows that agency costs contribute to both the increase and decrease of financial performance. Business strategy mediates the relationship between family ownership and financial performance. This shows that family companies do not concentrate on financial goals but rather on the sustainability. Business strategy influences the relationship between agency costs and financial performance. This shows that funds can be redistributed in the course of business strategy planning, which will, in turn, improve the company’s development.

scholarly journals Risiko Kredit, Risiko Pasar, Dan Kinerja Keuangan Perbankan Pada Masa Pandemi Covid-19

2021 ◽  
Vol 6 (2) ◽  
pp. 150-157
Author(s):  
Rini Dwi Astuti ◽  
Dewa Putra Krishna Mahardika
Keyword(s):  
Credit Risk ◽  
Financial Performance ◽  
Sampling Method ◽  
Banking Sector ◽  
Stock Exchange ◽  
Linear Regression Analysis ◽  
Multiple Linear Regression Analysis ◽  
Market Risk ◽  
Industrial Sectors ◽  
Positive Effect

The Covid-19 pandemic began to spread in Indonesia in March 2020. This caused a number of industrial sectors in Indonesia to experience a decrease in financial performance. One of the sectors that experienced a decline in financial performance was the banking sector. This study has purpose to determine the effect of credit risk and market risk on financial performance in commercial banks registered on the Indonesia Stock Exchange in the first until fourth quarters of 2020. The samples in this study is 35 banks. The sample is obtained by purposive sampling method. The method of analysis in this study is multiple linear regression analysis. From the results of the study, simultaneously credit risk and market risk affect financial performance. credit risk negatively affects financial performance. while market risk has a positive effect on financial performance

Modified integrated Islamic CSRD index and financial performance of Malaysian Islamic banks

2020 ◽  
Vol 11 (8) ◽  
pp. 1599-1617
Author(s):  
Fatimah Noor Rashidah Mohd Sofian ◽  
Rusnah Muhamad
Keyword(s):  
Financial Performance ◽  
Stakeholder Theory ◽  
Partial Least Square ◽  
Least Square ◽  
Islamic Banks ◽  
Content Type ◽  
Partial Least Square Analysis ◽  
The Relationship ◽  
Purposive Sample ◽  
Practical Implications

Purpose The purpose of this paper is to examine the relationship between the modified integrated Islamic CSRD index (MIICSRDi) and financial performance of Malaysian Islamic banks as perceived by the stakeholders. Design/methodology/approach This paper used survey questionnaire with a purposive sample of 343 stakeholders of Malaysian Islamic banks. A theoretical framework was developed and tested by using partial least square analysis. Findings The findings reveal that there is a significant positive relationship between the MIICSRDi and financial performance as perceived by the stakeholders. Research limitations/implications There is a lack of empirical research proposing an Islamic CSRD framework that is suitable to be applied within the context of the Malaysian environment. Hence, this paper shows that MIICSRDi in line with the stakeholder theory, Shariah principles and ‘urf principle (customary practice) can be used by Malaysian Islamic banks to increase their performance. Practical implications MIICSRDi can be used as one of the strategies to improve the financial performance of Islamic banks. In fact, it can be instilled in the value-based intermediation introduced by Bank Negara Malaysia for the rebranding of Islamic banks. Originality/value The relationship between perceived MIICSRDi and perceived financial performance is explained in light of the stakeholder theory, Shariah principles (unity, equilibrium, free will, responsibility and tazkiyah) and ‘urf principle (customary practice).

The Relationship between environmental Financial accounting practices and Financial performance of industrial listed companies in Palestine Stock Exchange

2021 ◽  
pp. 12-31
Author(s):  
Nedal Fareed Abdallah
Keyword(s):  
Financial Performance ◽  
Stock Exchange ◽  
Random Effect ◽  
Random Effect Model ◽  
Listed Companies ◽  
Least Square ◽  
Financial Accounting ◽  
Listed Firms ◽  
Effect Model ◽  
The Relationship

The research aimed to investigate the applicability of environmental financial accounting practices in the industrial listed companies in Palestine Exchange and to examine the relationship between the disclosure level of environmental financial accounting practices on the company’s financial performance. The research adopted the descriptive-analytical approach, and the analysis method involved a content analysis of the annual financial reports data which were collected from Industrial listed firms on the Palestine Stock Exchange for the period from 2015 to 2019, including the firms disclosed and not disclose EFAP. Ordinary least square (OLS), fixed effect model (FEM), and random effect model (REM) were employed for processing the data. The results reveal that there is a relationship between the EFAP and financial performance. In addition, there is a difference in financial performance between the group of firms disclosed and not disclosed EFAP. Based on the findings, some recommendations are given for motivating EFAP in the listed firms for improving financial performance.

scholarly journals Do Board Gender Diversity and Non-Executive Directors Affect CSR Reporting? Insight from Agency Theory Perspective

2020 ◽  
Vol 12 (20) ◽  
pp. 8597
Author(s):  
Cheng Guping ◽  
Muhammad Safdar Sial ◽  
Peng Wan ◽  
Alina Badulescu ◽  
Daniel Badulescu ◽  
...  
Keyword(s):  
Firm Size ◽  
Stock Exchange ◽  
Gender Diversity ◽  
Least Square ◽  
Executive Directors ◽  
Csr Reporting ◽  
Financial Firms ◽  
Big 4 ◽  
Using Data ◽  
Board Gender Diversity

Our paper provides a valuable contribution by exploring the following complex phenomenon: Do board gender diversity and reputational incentives of non-executive directors affect corporate social responsibility(CSR) reporting? To this end, we use panel data regression (fixed effect) to examine the above relationship by using data from the 2009 to 2019 timeperiod, by using data from non-financial firms listed on the Shanghai Stock Exchange. To deal with the possibility of an endogeneity problem, we have used the two-stage least square (2SLS) regression model. Our empirical results suggest that board gender diversity positively affects CSR reporting. Our study has found that the reputational incentives of non-executive directors improve the CSR reporting. Furthermore, reputational incentives of non-executive directors (NEDs) and CSR reporting are moderated by firm size, this effect being stronger for large firms. Our findings also show that the firm size positively moderates the relationship between gender diversity in boards and CSR reporting. The control variables, namely board size, board member average tenure, leverage, “big 4” and return on assets, have an impact on the firm’s CSR reporting. Therefore, our results contribute towards new aspects in respect to the emerging literature concerning the system of non-executive directors, protection of stakeholder’s interests, and CSR reporting, especially as regards China. Furthermore, our results are robust as concerns alternative measures of variables under consideration.

scholarly journals Empirical Analysis of Corporate Sustainability Performance: Linkage of Japanese Firms' Environmental and Economic Performance

2017 ◽  
Vol 3 (2) ◽  
Author(s):  
K. Gnanaweera ◽  
N. Kunori
Keyword(s):  
Financial Performance ◽  
Observational Data ◽  
Firm Size ◽  
Environmental Performance ◽  
Stock Exchange ◽  
Corporate Sustainability ◽  
Japanese Firms ◽  
Tokyo Stock Exchange ◽  
The Impact ◽  
The Relationship

The linkage between Corporate Environmental Performance (CEP) and Corporate Financial Performance (CFP) has been a long-standing debate since all previous efforts achieved inconsistent results. The current study therefore attempts to present the relationship between corporations’ environmental and financial performance to explore the notion of Corporate Social Responsibility (CSR) in a developed nation. This case derives empirical observational data from corporate sustainability reports and integrated annual reports of Japanese firms. The sample is comprised of observational data of a total of 85 Japanese corporations from 2008 to 2014. The selected firms are listed on the Tokyo Stock Exchange in the first section of the market division and are categorized under various industrial sectors. The effort of the current study has revealed that corporate environmental measurements have different effects on financial performance. The evidence was less strong in evaluating the impact level of all variables except firm size (total assets). Three hypotheses (H1, H2, and H3) were developed for further evaluation of the effect of financial indicators on environmental performance. H1 was accepted since environmental performance has a significant impact on firm size. However, the rejected H2 and H3 state that environmental performance has no significant impact on financial leverage and profitability, due to the weak relationship or insignificant outcome, i.e. in the profitability measurement, only Return on Sales (ROS) showed positive correlation between particular CEP variables, but the coefficient of determination (R2 value) does not support the ROS contribution for every model in the study. The other two profitability ratios (return on assets and return on equity) have less contribution. Both the relationship between environmental performance and financial performance according to R2 values and the relationship between CEP and CFP are broad spectrums that yet to be explored.KeywordsCorporate, Environmental, Financial, Sustainability, Tokyo Stock Exchange

scholarly journals An Indonesian Empirical Study of The Relationship between Firm’s Intellectual Capital, Financial Performance and Market Value

2020 ◽  
Vol 9 (4) ◽  
pp. 451-458
Author(s):  
Debby Andria Silviani ◽  
Vitradesie Noekent
Keyword(s):  
Financial Performance ◽  
Intellectual Capital ◽  
Stock Exchange ◽  
Market Value ◽  
Sampling Technique ◽  
Partial Least Square ◽  
Least Square ◽  
Testing Tool ◽  
Version 2.0 ◽  
The Relationship

The purpose of this study is to explain the effect of Intellectual Capital on the company’s financial performance and market value. The population used in this study are all large trasing subsector companies listed on the Indonesia Stock Exchange during the 2009-2018 studi period. The sampling technique in this study uses a purposive sampling technique that uses criteria that have been determined by researches in order to obtain a sample of 13 companies. The testing tool used is Partial Least Square (PLS) version 2.0. The result of this study indicate that there is a positive and significant influence of intellectual capital on the company’s financial performance and intellectual capital also has a positive and significant on the company’s market value.The suggestion in this research is companie wish to consider the use of intellectual capital to improve financial performance and market value of the company.

scholarly journals Intellectual Capital, Firm Value, and Financial Performance

2017 ◽  
Vol 1 (01) ◽  
pp. 29
Author(s):  
Aida Irsyahma ◽  
Nikmah Nikmah
Keyword(s):  
Financial Performance ◽  
Intellectual Capital ◽  
Firm Value ◽  
Banking Sector ◽  
Stock Exchange ◽  
Analysis Method ◽  
The Relationship ◽  
Modern Era ◽  
Positive Effect ◽  
Test Result

<p>The ownership of intangible assets especially intellectual capital has becoming more important in this modern era where technology and knowledge have significant roles in company operating activities. The objective of this study is to examine the effect of intellectual capital on firm value and financial performance as intervening variable. The sample in this study is the banking sector listed in Indonesia Stock Exchange between 2011-2014 and 15 banks become samples in this study. The data was analyzed using the path analysis method with SPSS.<br />The test result shows that intellectual capital has a positive effect on firm value, intellectual capital has a positive effect on financial performance, financial performance has a positive effect on firm value, and financial performance proved to intervene the relationship between intellectual capital and firm value.</p><p><br />Keywords: Financial Performance, Firm Value, Intellectual Capital</p>

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