State Ownership and Political Connections

2019 ◽  
Vol 45 (6) ◽  
pp. 2293-2321 ◽  
Author(s):  
Laszlo Tihanyi ◽  
Ruth V. Aguilera ◽  
Pursey Heugens ◽  
Marc van Essen ◽  
Steve Sauerwald ◽  
...  
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Global Economy ◽  
State Ownership ◽  
The State ◽  
Strategic Decision ◽  
Political Connections ◽  
Future Research ◽  
Firm Level ◽  
Firm Financial Performance

The influence of the state on firms in the global economy is alive and well. States have become dominant owners of companies in many countries around the world. Firms have also increasingly established political connections to access resources and improve their competitive positions. Nonetheless, our understanding of how state ownership and political connections affect firm performance remains limited and marked by conflicting findings. Using meta-analytical techniques on a sample of 210 studies spanning 139 countries, we examine two key research questions: (a) How do state ownership and political connections affect firm strategies and financial performance? and (b) How does firm-level strategic decision making mediate the relationships between state ownership, political connections, and firm financial performance? Our findings show that state ownership has a small negative effect on firm financial performance and that political connections have no direct consequences for performance. However, we find evidence that both state ownership and political connections have a profound effect on the strategies firms pursue, such as financial leverage, R&D intensity, and internationalization, and that these strategies play a mediating role in the state ownership–firm performance relationship. We conclude with some suggestions for fruitful future research in further connecting these two important and timely research fields.

scholarly journals How much state ownership do hybrid firms need for better performance?

2021 ◽  
Author(s):  
Bach Nguyen ◽  
Hoa Do ◽  
Chau Le
Keyword(s):  
Firm Performance ◽  
Small Businesses ◽  
Emerging Market ◽  
Resource Dependence Theory ◽  
State Ownership ◽  
The State ◽  
Strategic Decision ◽  
Political Connections ◽  
Business Ownership ◽  
Adequate Level

Abstract Hybrid ownership—sharing partial business ownership with the state—is a new form of political connections that entrepreneurs in developing countries may employ to improve their access to key resources. This study investigates hybrid ownership as a strategic decision of entrepreneurs running small businesses in Vietnam—a transition economy. Utilising the resource dependence theory and legitimacy viewpoint, we propose and evidently show that increased state ownership in hybrid firms leads to improved performance. However, increasing state ownership beyond a minority share threshold harms firm performance due to the presence of agency costs. Also, the involvement of the state in firm governance reduces the benefits gained from having state ownership. Plain English Summary Is the more the better? How much state ownership really matters for hybrid firms to enhance their performance? More state ownership means more access to resources and privileges; but too much state ownership may reduce firm efficiency due to its poor governance. Analysing more than one million observations of small businesses in Vietnam, this study offers three insightful implications. First, for academics, institutional conditions should be considered when investigating political connections, especially in an emerging market context. Second, for practitioners, political connections in the form of hybrid ownership when being held at an adequate level can boost firm performance. However, an exceeding level of state ownership in hybrid firms may become harmful. Third, for policymakers, we suggest that forming hybrid business ownership with the private sector helps firms make use of state-owned resources. This collaboration is a win-win solution as long as the state ownership remains at an adequate level.

Organizational Characteristics and Small Firms’ Performance Revisited

1989 ◽  
Vol 13 (2) ◽  
pp. 49-64 ◽  
Author(s):  
Paul B. Cragg ◽  
Malcolm King
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Small Firm ◽  
Small Firms ◽  
Causal Model ◽  
Organizational Characteristics ◽  
Future Research ◽  
Firm Financial Performance ◽  
Mixed Support ◽  
Research Studies

Numerous studies have attempted to gain a greater understanding of small firm performance with the intent of isolating factors which are important for success. The studies, some with serious limitations, suggest that many different variables are Important to success. A further study of 179 small, metal goods manufacturers enabled some of the specific relationships to be re-examined, but with mixed support for previous findings. Various suggestions are made for future research studies. A causal model of small firm financial performance is proposed.

scholarly journals Corporate social responsibility and firm financial performance: A literature review

2020 ◽  
Vol 4 (3) ◽  
pp. First
Author(s):  
Tien Thu Thuy Nguyen ◽  
Chi Ha Lien Nguyen
Keyword(s):  
Corporate Social Responsibility ◽  
Firm Performance ◽  
Social Responsibility ◽  
Financial Performance ◽  
Developed Countries ◽  
Emerging Countries ◽  
Future Research ◽  
Firm Financial Performance ◽  
Wide Range ◽  
Corporate Social

This paper aims to investigate the literature on Corporate Social Responsibility (CSR) to provide a comprehensive overview of whether CSR would make a difference to organisational financial outcomes. The paper also provides a closer focus on CSR research in Vietnam. Through an extensive analysis of 86 most recent empirical studies from 2015 to 2020, we found that the contribution of CSR to firm financial performance has received significant support from the literature. Yet the overall findings are still inconsistent, and the majority of evidence is mainly from developed countries. The current literature on CSR and firm performance highlights some important issues, ranging from theoretical background, CSR measures, methodological issues, the need to consider intervening factors in CSR-firm performance relationship, and the need to extend this literature further in developing and emerging countries. The literature on CSR-firm performance research in Vietnam closely resembles these problems. Research in this country domain is still scarce in both quantity and quality, reflecting in a number of issues including the limited number of international publications, the absence of theory-driven research, and the less rigorous research design. Building on these findings, we recommend future research to (i) adopt the multi-theoretical approach for a more extensive view on whether and how CSR contributes to firm performance; (ii) obtain more rigorous methodological approaches to measure a wide range of CSR dimensions and address the issue of endogeneity in CSR-firm performance causal relationship; (iii) open the Pandora box to explore why and through which channels CSR can improve firm financial performance with the presence of situational factors; and (iv) build the literature with more evidence from different country contexts and from developing and emerging countries.

scholarly journals Corporate social responsibility and firm financial performance: A literature review

2021 ◽  
Author(s):  
AISDL
Keyword(s):  
Corporate Social Responsibility ◽  
Firm Performance ◽  
Social Responsibility ◽  
Financial Performance ◽  
Developed Countries ◽  
Emerging Countries ◽  
Future Research ◽  
Firm Financial Performance ◽  
Wide Range ◽  
Corporate Social

This paper aims to investigate the literature on Corporate Social Responsibility (CSR) to provide a comprehensive overview of whether CSR would make a difference to organisational financial outcomes. The paper also provides a closer focus on CSR research in Vietnam. Through an extensive analysis of 86 most recent empirical studies from 2015 to 2020, we found that the contribution of CSR to firm financial performance has received significant support from the literature. Yet the overall findings are still inconsistent, and the majority of evidence is mainly from developed countries. The current literature on CSR and firm performance highlights some important issues, ranging from theoretical background, CSR measures, methodological issues, the need to consider intervening factors in CSR-firm performance relationship, and the need to extend this literature further in developing and emerging countries. The literature on CSR-firm performance research in Vietnam closely resembles these problems. Research in this country domain is still scarce in both quantity and quality, reflecting in a number of issues including the limited number of international publications, the absence of theory-driven research, and the less rigorous research design. Building on these findings, we recommend future research to (i) adopt the multi-theoretical approach for a more extensive view on whether and how CSR contributes to firm performance; (ii) obtain more rigorous methodological approaches to measure a wide range of CSR dimensions and address the issue of endogeneity in CSR-firm performance causal relationship; (iii) open the Pandora box to explore why and through which channels CSR can improve firm financial performance with the presence of situational factors; and (iv) build the literature with more evidence from different country contexts and from developing and emerging countries.

scholarly journals The moderating role of director’s financial expertise in political connections and corporate financial performance in Pakistan

Accounting ◽  
2021 ◽  
pp. 865-874
Author(s):  
Murtaza Masud Niazi ◽  
Zaleha Othman ◽  
Sitraselvi Chandren
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Emerging Market ◽  
Political Influence ◽  
Political Connections ◽  
Political Connection ◽  
Firm Financial Performance ◽  
Financial Expertise ◽  
The Impact ◽  
The Relationship

Prior theoretical and empirical studies have suggested that political influence affects the application of corporate governance and firm performance enormously. However, several fundamental questions remain to be answered. To fill this knowledge gap,the study's main objectives are examining the direct impact of political connection on firm financial performance in Pakistani non-financial listed companies and the moderating effect of director's financial expertise on political connections and firm financial performance. The study utilised panel data of 220 firms from 2008 to 2017 and used panel corrected standard error regression analysis. The results show that political connection negatively impacted firm financial performance, and director financial expertise as a moderator strengthened the relationship between political connections and firm financial performance. This study's results supported political economy theory in that weak judicial systems and unstable political systems have immense effects on investor’s rights. The study contributes to extending the existing literature on political connection by providing evidence of the impact of politically connected firms on firm performance in an emerging market. The study also deliberates on how the director’s financial expertise contributes towards the relationship. The findings could be generalised to other countries with similar degrees of development and culture.

Corporate Governance, Political Connections and Firm Performance: The Role of Political Regimes and Size

2020 ◽  
pp. 097215091987652
Author(s):  
Sabeeh Ullah ◽  
Yasir Kamal
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Financial Performance ◽  
Performance Measure ◽  
Political Connections ◽  
Executive Directors ◽  
Firm Financial Performance ◽  
Democratic Regimes ◽  
The Relationship

This article empirically examines the relationship between corporate governance and firm financial performance, and the interplay of political connections of 150 non-financial listed Pakistani firms ranging from 2001 to 2014. Generally, and consistent with the prior researchers, we reported that corporate governance is an essential predictor of firm financial performance in Pakistan. Moreover, the results indicate that political connections substitute non-executive directors (NXD), executive directors (EXD) and board meetings (BM) in terms of firm performance measure return on asset (ROA), whereas NXD and EXD complement in terms of Tobin’s Q. We also found some variations in these effects, when moving from large to small size sampled firms and dictator to democratic regimes. Theoretically, our results support the Agency, Resource Dependency and Stewardship theories.

Intellectual capital in Ugandan service firms as mediator of board governance and firm performance

2014 ◽  
Vol 5 (3) ◽  
pp. 300-340 ◽  
Author(s):  
Stephen Korutaro Nkundabanyanga ◽  
Joseph M. Ntayi ◽  
Augustine Ahiauzu ◽  
Samuel K. Sejjaaka
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Intellectual Capital ◽  
Predictor Variable ◽  
Mediating Effect ◽  
Board Governance ◽  
Content Type ◽  
Firm Financial Performance ◽  
Starting Point ◽  
The Relationship

Purpose – The purpose of this paper is to examine the mediating effect of intellectual capital on the relationship between board governance and perceived firm financial performance. Design/methodology/approach – This study was cross-sectional. Analyses were by SPSS and Analysis of Moment Structure on a sample of 128 firms. Findings – The mediated model provides support for the hypothesis that intellectual capital mediates the relationship between board governance and perceived firm performance. while the direct relationship between board governance and firm financial performance without the mediation effect of intellectual capital was found to be significant, this relationship becomes insignificant when mediation of intellectual capital is allowed. Thus, the entire effect does not only go through the main hypothesised predictor variable (board governance) but majorly also, through intellectual capital. Accordingly, the connection between board governance and firm financial performance is very much weakened by the presence of intellectual capital in the model – confirming that the presence of intellectual capital significantly acts as a conduit in the association between board governance and firm financial performance. Overall, 36 per cent of the variance in perceived firm performance is explained. the error variance being 64 per cent of perceived firm performance itself. Research limitations/implications – The authors surveyed directors or managers of firms and although the influence of common methods variance was minimal, the non-existence of common methods bias could not be guaranteed. Although the constructs have been defined as precisely as possible by drawing upon relevant literature and theory, the measurements used may not perfectly represent all the dimensions. For example board governance concept (used here as a behavioural concept) is very much in its infancy just as intellectual capital is. Similarly the authors have employed perceived firm financial performance as proxy for firm financial performance. The implication is that the constructs used/developed can realistically only be proxies for an underlying latent phenomenon that itself is not fully measureable. Practical implications – In considering the behavioural constructs of the board, a new integrative framework for board effectiveness is much needed as a starting point, followed by examining intellectual capital in firms whose mediating effect should formally be accounted for in the board governance – financial performance equation. Originality/value – Results add to the conceptual improvement in board governance studies and lend considerable support for the behavioural perspective in the study of boards and their firm performance improvement potential. Using qualitative factors for intellectual capital to predict the perceived firm financial performance, this study offers a unique dimension in understanding the causes of poor financial performance. It is always a sign of a maturing discipline (like corporate governance) to examine the role of a third variable in the relationship so as to make meaningful conclusions.

Assessing the Value of Information Technology Investment to Firm Performance

2002 ◽  
pp. 257-278
Author(s):  
Qing Hu ◽  
Robert T. Plant
Keyword(s):  
Information Technology ◽  
Firm Performance ◽  
Financial Performance ◽  
Capital Investment ◽  
Large Scale ◽  
Performance Data ◽  
It Investment ◽  
Firm Level ◽  
It Investments ◽  
And Performance

The promise of increased competitive advantage has been the driving force behind the large-scale investment in information technology (IT) over the last three decades. There is a continuing debate among executives and academics as to the measurable benefits of this investment. The return on investment (ROI) and other performance measures reported in the academic literature indicate conflicting empirical findings. Many previous studies have based their conclusions on the statistical correlation between IT capital investment and firm performance data of the same time period. In this study we argue that the causal relationship between IT investment and firm performance could not be reliably established through concurrent IT and performance data. We further submit that it would be more convincing to infer causality if the IT investments in the preceding years are significantly correlated with the performance of a firm in the subsequent year. Using the Granger causality models and three samples of firm-level financial data, we found no statistical evidence that IT investments have caused the improvement of financial performance of the firms in the samples. On the contrary, the causal models suggest that improved financial performance over consecutive years may have contributed to the increase of IT investment in the subsequent year. Implications of these findings as well as directions for future studies are discussed.

scholarly journals Government institutional support, entrepreneurial orientation, strategic renewal, and firm performance in transitional China

2019 ◽  
Vol 25 (3) ◽  
pp. 433-456 ◽  
Author(s):  
Chengli Shu ◽  
Dirk De Clercq ◽  
Yunyue Zhou ◽  
Cuijuan Liu
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Entrepreneurial Orientation ◽  
Transition Economy ◽  
Institutional Support ◽  
Equation Modeling ◽  
Content Type ◽  
Strategic Renewal ◽  
Firm Financial Performance ◽  
The Relationship

PurposeThe purpose of this paper is to examine how entrepreneurial orientation (EO) and strategic renewal (as a critical dimension of corporate entrepreneurship) might transmit government institutional support and thereby enhance firm performance in a transition economy.Design/methodology/approachMulti-respondent data were collected from 230 Chinese-based firms. The hypotheses were tested with structural equation modeling, in combination with a bias-corrected bootstrap method, to assess the significance of the theorized direct and indirect relationships.FindingsGovernment institutional support enhances EO and strategic renewal individually, yet EO also fully mediates the relationship between government institutional support and strategic renewal. Moreover, strategic renewal fully mediates the relationship between EO and firm financial performance, and it partially mediates the relationship between EO and firm reputation.Originality/valueThis study contributes to entrepreneurship literature by testing an organization-level model of entrepreneurial phenomena in established firms that identifies EO and strategic renewal as two distinct mechanisms through which government institutional support in a transition economy can enhance organizational effectiveness, which entails the firm’s financial performance and reputation. In doing so, this study provides an extended understanding of how EO and strategic renewal might influence a firm’s financial and nonfinancial outcomes in different ways.

scholarly journals Debt Financing and Firm Performance: Evidence from an Emerging South-Asian Country

2019 ◽  
Vol 10 (1) ◽  
pp. 40
Author(s):  
Mohammad Mazibar Rahman ◽  
Umme Khadija Kakuli ◽  
Shahnaz Parvin ◽  
Ayrin Sultana
Keyword(s):  
Firm Performance ◽  
Capital Structure ◽  
Financial Performance ◽  
Negative Influence ◽  
Short Term ◽  
Return On Assets ◽  
Return On Equity ◽  
Firm Financial Performance ◽  
Total Debt

This paper aims to empirically investigate the impact of capital structure choice on the firm performance of the firms listed under the Dhaka Stock Exchange of Bangladesh. Multiple regression has been employed in this research to determine the relationship between the capital structure and the firm’s financial performance. Three ratios of financial performance, i.e., return on assets, return on equity, and gross margin, have been used as a sample of non-financial Bangladeshi companies, selected from 2010 to 2015. The study records numerous findings. First, the result shows a significant negative influence of long-term debt (LTD) and total debt (TTD) on firm financial performance measured by return on assets (ROA), but no significant relationship is found between short-term debt (STD) and this measure of firm’s financial performance. Moreover, the research found that there is no significant effect of short-term debt, long-term debt and total debt on the firm financial performance measured by return on equity (ROE). Finally, the result shows that a significant negative influence of short-term debt and total debt on firm performance measured by GM, but no significant relationship was found between long-term debt and financial performance. In general terms, the results of this study may suggest that capital structure has a negative influence on firms’ financial performance in Bangladesh.

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