Firm efficiency and the investment anomalies

2020 ◽  
Vol 46 (12) ◽  
pp. 1589-1603
Author(s):  
Kyungyeon (Rachel) Koh ◽  
Sanjay K. Nawalkha
Keyword(s):  
Firm Growth ◽  
Firm Investment ◽  
Fixed Asset ◽  
Firm Efficiency ◽  
Content Type ◽  
Corporate Managers ◽  
Efficiency Measures ◽  
Firm Investments ◽  
Asset Growth ◽  
Asset Pricing Puzzles

PurposeThe purpose of this paper is to investigate whether firm efficiency can explain the investment anomaly. The investment anomaly refers to the persistent negative relation between firm growth and future risk-adjusted returns. When firms grow by investing heavily, the market often takes the growth as positive news initially but will correct prices downward subsequently if the firms lack skills to materialize value from the investments.Design/methodology/approachThe author conducts portfolio sorting and Fama–Macbeth regression analyses with three different measures of efficiency and four variables for firm investment: net stock issuance (NSI), total asset growth (dAA), fixed asset and inventory growth (IA) and net operating assets (NOA).FindingsThe author finds that the NSI, dAA and IA anomalies are concentrated in firms with low overall efficiency. In addition, there is strong evidence that manager-driven efficiency is closely related to the NSI anomaly and limited evidence that NOA efficiency plays a role in the NSI, IA and NOA anomalies.Originality/valueThe research contributes to the literature by employing advanced efficiency measures developed by Demerjian et al. (2012) to resolve extant asset pricing puzzles. Also, the findings offer important implications for corporate managers and investors by demonstrating the effect of firm investments and efficiency on future profitability of stocks.

scholarly journals Investigation on firm efficiency: evidence from selected Asia-Pacific countries

2018 ◽  
Vol 25 (8) ◽  
pp. 3062-3080 ◽  
Author(s):  
Khar Mang Tan ◽  
Fakarudin Kamarudin ◽  
Amin Noordin Bany-Ariffin ◽  
Norhuda Abdul Rahim
Keyword(s):  
Technical Efficiency ◽  
Small Firms ◽  
Banking Sector ◽  
Profit Maximization ◽  
Asia Pacific ◽  
Scale Efficiency ◽  
Scale Level ◽  
Firm Efficiency ◽  
Content Type ◽  
Parametric Data

Purpose The purpose of this paper is to examine the firm efficiency or technical efficiency (TE), pure technical efficiency (PTE) and scale efficiency (SE) in the selected developed and developing Asia-Pacific countries. Design/methodology/approach The sample consists of a sum of 700 firms in selected developed and developing Asia-Pacific countries over the period from 2009 to 2015. The non-parametric data envelopment analysis under the production approach is used to investigate firm efficiency. Findings On average, this paper discovers that the firms in selected Asia-Pacific countries are moderately efficient. Scale inefficiency (SIE) is found to be the dominant source of firms’ technical inefficiency. The analysis of return to scale shows that the large firms tend to operate at decreasing return to scale level, while the small firms tend to operate at increasing return to scale level. Practical implications The findings from this paper provide significant insights to the policy makers and firm managers in promoting the efficient firms of Asia-Pacific countries. Originality/value The present paper conducts a critical analysis on return to scale in the firms sector of Asia-Pacific context, which is ignored by the past studies on firm efficiency since the analysis of return to scale is mostly emphasized on banking sector. The precise nature of SIE is important for a firm to be efficient in achieving the firm’s primary goals of profit maximization and sustaining market competitiveness.

Unveiling the growth process: entrepreneurial growth and the use of external resources

2014 ◽  
Vol 20 (1) ◽  
pp. 20-41 ◽  
Author(s):  
Andrea Furlan ◽  
Roberto Grandinetti ◽  
Adriano Paggiaro
Keyword(s):  
Firm Growth ◽  
High Growth ◽  
Sustainable Growth ◽  
Equation Modeling ◽  
Business Research ◽  
Content Type ◽  
External Resources ◽  
External Relationships ◽  
Entrepreneurial Growth ◽  
Over Time

Purpose – Business research and entrepreneurship literature typically examines external resources as input or output of entrepreneurial (or high) growth. The purpose of this paper is to combine these two perspectives in describing and modeling high growth. Design/methodology/approach – The study tests the hypotheses on a sample of medium-sized, established manufacturing firms using structural equation modeling. Findings – Results provide original contributions to the business research on firm growth and entrepreneurship. They are consistent with studies advocating the importance of adopting a process perspective when studying business growth to probe the causal mechanisms behind growth. Research limitations/implications – Being quantitative, this study does not address the dynamic interdependencies between proprietary and hybrid growth. However, the literature on entrepreneurship would benefit from qualitative studies that explore how successful and sustainable growth processes combine the two modes of growth. Originality/value – Findings partially discard the input and output approach in favor of a vision of entrepreneurial growth as a process that unfolds over time with the development of external relationships. Only the process of collaboration, a core competence of entrepreneurial firms, reduces information asymmetries and agency problems, thus turning the corresponding inter-organizational relationships into formidable feeders of firm growth. Entrepreneurial growth is in fact a process that needs external relationships in order to flourish over time.

Measuring higher education performance in Brazil: government indicators of performance vs ideal solution efficiency measures

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Peter F. Wanke ◽  
Jorge J.J. Antunes ◽  
Vitor Y. Miano ◽  
Cassio L.P. do Couto ◽  
Franklin G. Mixon
Keyword(s):  
Covariance Matrix ◽  
Educational Institution ◽  
Strong Relationship ◽  
Ideal Solution ◽  
Content Type ◽  
Federal Institute ◽  
Efficiency Measures ◽  
Solution Efficiency ◽  
Education Performance ◽  
The Ideal

PurposeThis study extends the educational institutions' performance and efficiency literature by examining Brazil's Federal Institute of Education, Science and Technology (FIEST), which consists of educational units throughout the country that span several levels of education.Design/methodology/approachThe authors build and analyze a covariance matrix consisting of both a group of efficiency measures and a group of performance indicators used by Brazil's Ministry of Education (BME). The values in the covariance matrix are maximized through application of the Technique for Order of Preference by Similarity to the Ideal Solution (TOPSIS), in which the weights of each variable are optimized in order to capture the direction of the relationship between the two sets of efficiency measures.FindingsAlthough the authors find that the collective efficiency of the educational units analyzed did not change during the period of study, the analysis reveals that government indicators of performance do not exhibit a strong relationship to the ideal solution efficiency measures used in this study.Originality/valueThis study extends the educational institution efficiency literature by examining Brazil's FIEST, which consists of 40 educational units throughout the country that spans several levels of education, from upper high school vocational courses to higher degrees.

Accruals, Managerial Operating Decisions, and Firm Growth: Implications for Tests of Earnings Management

2018 ◽  
Vol 31 (1) ◽  
pp. 153-193 ◽  
Author(s):  
Michelle Liu
Keyword(s):  
Growth Factor ◽  
Earnings Management ◽  
Firm Growth ◽  
Type I Error ◽  
Explanatory Power ◽  
Error Rates ◽  
Type I ◽  
Operating Cycle ◽  
Nonlinear Growth ◽  
Asset Growth

ABSTRACT One of the most crucial yet controversial issues in executive performance evaluation is disentangling which managerial decisions reflect firms' economic position versus opportunistic earnings management. I explore this issue and find that specific managerial policies often used by growing firms are likely to be identified as upward earnings management by widely used annual accrual expectation models. I find that incorporating linear and nonlinear growth measures (for various assets and a growth factor) into these models increases the explanatory power by 1.01 percent to 9.86 percent. Models with asset growth, receivables growth, and a growth factor generate the lowest Type I error rates, while models with asset growth, operating cycle, and a growth factor generate the lowest Type II error rates. In reexamined tests of upward earnings management around IPOs, inferences change after controlling for growth. I make empirical suggestions to help distinguish growth from opportunism in tests of earnings management.

Does international expansion constrain growth? Business groups, internationalization, institutional distance, and the Penrose effect

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Wen-Ting Lin ◽  
Ying-Yu Chen ◽  
David Ahlstrom ◽  
Linda C. Wang
Keyword(s):  
Information Processing ◽  
Firm Growth ◽  
Business Groups ◽  
Adjustment Costs ◽  
Ordinary Least Squares ◽  
Institutional Distance ◽  
Content Type ◽  
Managerial Resources ◽  
Penrose Effect ◽  
The Relationship

Purpose This paper aims to use the institutional and information-processing perspectives to explore their association with between internationalization and the Penrose effect phenomenon for business groups (BGs). Design/methodology/approach The authors use ordinary least squares regression models to test arguments about data pertaining to 101 Taiwanese BGs’ foreign direct investments. Findings The results indicate that greater levels of depth and scope in the process of internationalization during one period may negatively affect rates of growth in the following period. The results further demonstrate that institutional distance moderates the relationship. Research limitations/implications Using the perspective of information-processing demands, the authors provide alternate explanations regarding the relationship between the process of internationalization (depth, scope and rhythm) and the Penrose effect. Originality/value Owners and managers should focus on both the depth and the scope of internationalization. BGs are likely to incur high dynamic adjustment costs, which then limit the rate of BGs’ growth. Managers should balance international market uncertainty with current managerial resources when determining how deeply and broadly to expand internationally and where to enter. In addition, as recent major panel studies suggest, management capabilities and practices can improve significantly, which has a positive effect on firm growth and performance. This does require the careful development and acquisition of the managerial resources needed for internationalization.

scholarly journals Leverage and firm investment: the role of information asymmetry and growth

2019 ◽  
Vol 27 (1) ◽  
pp. 56-73 ◽  
Author(s):  
Albert Danso ◽  
Theophilus Lartey ◽  
Samuel Fosu ◽  
Samuel Owusu-Agyei ◽  
Moshfique Uddin
Keyword(s):  
Information Asymmetry ◽  
High Growth ◽  
Firm Investment ◽  
Financial Leverage ◽  
Content Type ◽  
Growth Firms ◽  
The Impact ◽  
The Relationship ◽  
Role Of Information

PurposeThis paper aims to demonstrate how financial leverage impacts firm investment and the extent to which this relationship is conditional on the level of information asymmetry as well as growth.Design/methodology/approachThe paper relies on data from 2,403 Indian firms during the period 1995-2014, generating a total of 19,544 firm-year observations. Analysis is conducted by using various panel econometric techniques.FindingsDrawing insights from agency theories, the paper uncovers that financial leverage is negatively and significantly related to firm investment. It is also observed that the impact of financial leverage on firm investment is significant for high information asymmetric firms. Finally, the paper shows that the relationship between leverage and firm investment is significant for low-growth firms. However, no significant relationship is found between leverage and investment for high-growth firms.Originality/valueThis paper provides fresh evidence on the leverage–investment nexus and, to the authors’ knowledge, it the first paper to examine the extent to which this leverage–investment relationship is driven by the level of information asymmetry.

scholarly journals Towards Extending Dividend Puzzle Debate: What Motivates Distribution of Corporate Earnings in Tanzania?

2020 ◽  
Vol 8 (1) ◽  
pp. 18
Author(s):  
Josephat Lotto
Keyword(s):  
Firm Size ◽  
Firm Growth ◽  
Dividend Policy ◽  
Stock Exchange ◽  
High Growth ◽  
Dar Es Salaam ◽  
Corporate Managers ◽  
Financial Firms ◽  
Corporate Earnings ◽  
Control Tool

This paper investigates the determinants of dividend policy in Tanzania. The study employed a panel data of non-financial firms listed on the Dar es Salaam Stock Exchange (DSE) for the period 2008–2017. The paper reports profitability, liquidity, firm size, leverage, firm growth, previous dividend, and GDP as the major determinants of corporate dividend policy. According to the results, leverage, firm growth, and GDP are negatively related to dividend payout ratio while firm size, profitability, liquidity, and lagged dividend are positively related to dividend policy. More specifically, large-sized firms, highly profitable firms, and firms who paid dividend in previous years are more likely to consider paying dividend. However, payment of dividend will all depend on whether the firm is liquid enough to afford that. On the other hand, high-growth and leveraged firms would not probably consider paying dividend, and will, therefore, opt saving money to finance their expansion and honor their debt obligations. Following these results, corporate managers are advised to consider preferences of investors towards developing corporate dividend policy; to strive paying dividend whenever economically viable (as it signals the firm’s reputation), and to limit excessive borrowing to protect firms from getting into financial meltdown (although borrowing is considered a control tool for agency-related problems).

A design approach towards sustainable buildings in Algeria

2019 ◽  
Vol 9 (3) ◽  
pp. 229-245
Author(s):  
Sofiane Rahmouni ◽  
Rachid Smail
Keyword(s):  
Energy Consumption ◽  
Simulation Software ◽  
Cold Climate ◽  
Design Approach ◽  
Office Building ◽  
Design Stage ◽  
Building Performance ◽  
Sustainable Buildings ◽  
Content Type ◽  
Efficiency Measures

Purpose The purpose of this paper is to achieve the national strategic agenda’s criteria that aim for accomplishing sustainable buildings by estimating the effects of energy efficiency measures in order to reduce energy consumption and CO2 emission. Design/methodology/approach A design approach has been developed based on simulation software and a modeled building. Therefore, a typical office building is considered for testing five efficiency measures in three climatic conditions in Algeria. This approach is conducted in two phases: first, the analysis of each measure’s effect is independently carried out in terms of cooling energy and heating energy intensities. Then, a combination of optimal measures for each climate zone is measured in terms of three sustainable indicators: final energy consumption, energy cost saving and CO2 emission. Findings The results reveal that a combination of optimal measures has a substantial impact on building energy saving and CO2 emission. This saving can rise to 41 and 31 percent in a hot and cold climate, respectively. Furthermore, it is concluded that obtaining higher building performance, different design alternatives should be adapted to the climate proprieties and the local construction materials must be applied. Originality/value This study is considered as an opportunity for achieving the national strategy, as it may contribute in improving office building performance and demonstrating a suitable tool to assist stakeholders in the decision making of most important parameters in the design stage for new or retrofit buildings.

scholarly journals The early growth of start-ups: innovation matters. Evidence from Italy

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Raffaele Fiorentino ◽  
Sergio Longobardi ◽  
Alessandro Scaletti
Keyword(s):  
Propensity Score ◽  
Propensity Score Matching ◽  
Firm Growth ◽  
Ad Hoc ◽  
Early Stage ◽  
New Ventures ◽  
Objective Measure ◽  
Content Type ◽  
Start Up ◽  
Start Ups

PurposeDespite the relevance of innovation in entrepreneurship literature, empirical research on the innovation-performance relationship in start-ups is underdeveloped and shows controversial results. To bridge this gap, the aim of this paper is to investigate the role of innovativeness on new venture performance in the early stage of the life cycle.Design/methodology/approachRegression modelling and propensity score matching are used to reveal systematic differences in growth between innovative start-ups (ISUPs) and non-innovative start-ups. We use an ad hoc dataset obtained through merging the financial database AIDA with data from administrative sources (Italian Chambers of Commerce and the Italian Ministry for Economic Development).FindingsThe results show that differences in growth can be explained by the different levels of innovativeness in new ventures. Moreover, unlike in prior studies, the innovation inputs matter more than innovation outputs. Indeed, the results support the idea that innovation policies can contribute to maximising the potential of start-ups.Practical implicationsThe findings provide suggestions for policy makers and entrepreneurs to help firms configure ex ante appropriate actions to support the growth of new ventures in the start-up stage.Originality/valueThis study is the first to use the new objective measure of start-up innovation, available from the Italian LD 221 register. Second, different types of innovation are investigated as antecedents of firm growth. Third, we employ propensity score matching, which favours revealing systematic differences in growth between ISUPs and non-innovative start-ups. Fourth, the results of our study are the first to offer evidence on the effectiveness of the new Italian sustaining ISUPs policy.

scholarly journals Toward the optimized crowdsourcing strategy for OCR post-correction

2019 ◽  
Vol 72 (2) ◽  
pp. 179-197
Author(s):  
Omri Suissa ◽  
Avshalom Elmalech ◽  
Maayan Zhitomirsky-Geffet
Keyword(s):  
Character Recognition ◽  
Optical Character Recognition ◽  
Stage Structure ◽  
Historical Documents ◽  
Two Phase ◽  
Content Type ◽  
Historical Texts ◽  
Efficiency Measures ◽  
Historical Text ◽  
Amazon's Mechanical Turk

Purpose Digitization of historical documents is a challenging task in many digital humanities projects. A popular approach for digitization is to scan the documents into images, and then convert images into text using optical character recognition (OCR) algorithms. However, the outcome of OCR processing of historical documents is usually inaccurate and requires post-processing error correction. The purpose of this paper is to investigate how crowdsourcing can be utilized to correct OCR errors in historical text collections, and which crowdsourcing methodology is the most effective in different scenarios and for various research objectives. Design/methodology/approach A series of experiments with different micro-task’s structures and text lengths were conducted with 753 workers on the Amazon’s Mechanical Turk platform. The workers had to fix OCR errors in a selected historical text. To analyze the results, new accuracy and efficiency measures were devised. Findings The analysis suggests that in terms of accuracy, the optimal text length is medium (paragraph-size) and the optimal structure of the experiment is two phase with a scanned image. In terms of efficiency, the best results were obtained when using longer text in the single-stage structure with no image. Practical implications The study provides practical recommendations to researchers on how to build the optimal crowdsourcing task for OCR post-correction. The developed methodology can also be utilized to create golden standard historical texts for automatic OCR post-correction. Originality/value This is the first attempt to systematically investigate the influence of various factors on crowdsourcing-based OCR post-correction and propose an optimal strategy for this process.

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