scholarly journals Board Capital Effect on Firm Performance: Evidence from Indonesia

2021 ◽  
Vol 21 (1) ◽  
pp. 491-506
Author(s):  
Maria Kontesa ◽  
Andreas Lako ◽  
Wendy
Keyword(s):  
Human Capital ◽  
Firm Performance ◽  
Financial Distress ◽  
Board Members ◽  
Firm Level ◽  
Capital Theory ◽  
Strategic Resources ◽  
Board Capital ◽  
And Performance ◽  
High Level

Human capital effects have been ignored as important resources to induce the organization’s performance in firm-level research. The proponents of human capital theory and resource-based view theory argue that the human resources attached to each board member, such as networking, education, and experience, might induce the performance. Yet, agency theory argues those strategic resources might bring higher transaction costs and entrenchment costs. Therefore, this study aims to examine the board's capital effect on firm performance for a sample of 252 listed firms in Indonesia over 2011–2017. Using dynamic GMM panel regression, we confirm the hypothesis about board capital and performance. The results imply that board members’ networking and experience are two important factors for firm performance. However, boar members’ education does not give any impact. It confirms prior theories whereby the capability and competency of directors are an important source for the firm to achieve its objective. Networking and experience might help the firm to avoid financial distress. It furthers implies that shareholders should choose board members with a high level of networking and experience, not education.

Human Resource Practices and Firm Performance in China: The Moderating Roles of Regional Human Capital Quality and Firm Innovation Strategy

2015 ◽  
Vol 11 (2) ◽  
pp. 237-261 ◽  
Author(s):  
Xiaobei Li ◽  
Xin Qin ◽  
Kaifeng Jiang ◽  
Sanbao Zhang ◽  
Fei-Yi Gao
Keyword(s):  
Human Capital ◽  
Firm Performance ◽  
Human Resource ◽  
Business Strategy ◽  
Innovation Strategy ◽  
Performance Study ◽  
Firm Level ◽  
Capital Theory ◽  
Hr Practices ◽  
Capital Development

ABSTRACTWe conducted two studies to investigate the contingent role of regional human capital quality (i.e., the knowledge, skills, and abilities of the collective workforce in a region) in the relationship between firm-level human resource (HR) practices (i.e., practices focusing on employees’ human capital development) and firm performance in China. Drawing upon human capital theory, we hypothesized that the human capital–enhancing HR practices and regional human capital quality have a substitutive effect on firm performance. Study 1 uses a World Bank survey of 9,125 firms in 30 provinces. We found that the human capital–enhancing HR practices relate more strongly to firm performance when regional human capital quality was lower than when it was higher. Study 2 used a sample of 203 firms across seven provinces. We found similar results. We further hypothesized and found that the substitutive effect of regional human capital quality was stronger when a firm adopted an innovation strategy. Our findings provide new evidence for the contingency perspective of strategic HR management and highlight the importance of matching HR practices with local labor quality conditions and the business strategy of the firm.

scholarly journals Exploring the Relationship between Financial Distress, Financial Flexibility, and Firm Performance: Empirical Evidence from Pakistan Stock Exchange

2018 ◽  
pp. 1-16
Author(s):  
Yasin Mahmood ◽  
Muhammad Faisal Rizwan ◽  
Abdul Rashid
Keyword(s):  
Firm Performance ◽  
Panel Data ◽  
Financial Distress ◽  
Stock Exchange ◽  
Z Score ◽  
Firm Level ◽  
Financial Flexibility ◽  
Corporate Managers ◽  
And Performance ◽  
The Impact

Purpose– This main purpose of this paper is to empirically investigate the impact of corporate financial flexibility (FF) on financial distress and performance of firms listed on the Pakistan Stock Exchange (PSX). It enables to know how financial flexibility affects the firm financial strength, financial distress, and corporate performance. Design/methodology/approach –This study focuses on a firm level data of 192 non-financial firms covering the period 1992 - 2014. The fixed effect model logistic regression is applied by using unbalanced panel data to examine the impact of financial flexibility on financial distress, and performance of sample firms. Findings – The results reveal that financially flexible firms are less likely to face financial distress. As firms have more financial flexibility, the probability of financial distress decreases as well. It is also found that financially flexible firms are more likely to perform well than counterpart firms. By using the Altman z score as a measure of financial distress it is revealed that as the Altman z score increases, the chances of financial distress reduce as well. These findings also suggest the existence of pecking order in Pakistani firms; because firms rely on internal sources first, second go to external sources of financing. Practical implications – the findings of this study enable the corporate managers to avoid financial distress by obtaining and maintaining financial flexibility by keeping the leverage level lower than industry level. By attaining and maintaining financial flexibility, corporate managers can also raise the performance of the firm as well. It can also enable to make appropriate capital structure decision to finance managers of corporate firms. The creditors may provide the loan to sound firms who have no or least chances of financial distress. The lenders may also get benefit from it by requiring the interest rate as per risk of financial distress of the firm. Investors may avoid investing in firms having very little or no financial flexibility. JEL Classification– G33, L25 Keywords: Altman z score, financial flexibility, firm performance, return on asset, panel data, financial distress, modified z score.

scholarly journals BOARD CAPITAL AND BANK EFFICIENCY: INSIGHT FROM VIETNAM

2020 ◽  
Vol 21 (2) ◽  
pp. 483-493 ◽  
Author(s):  
Maria Kontesa ◽  
Esmie Obrin Nichol ◽  
Jia-Sing Bong ◽  
Rayenda Khresna Brahmana
Keyword(s):  
Human Capital ◽  
Future Research ◽  
Board Members ◽  
Resource Base ◽  
Bank Efficiency ◽  
Capital Theory ◽  
Board Capital ◽  
Resource Base View ◽  
Base View

This study investigates the role of board capital on bank’s efficiency for a sample of 45 banks in Vietnam over 2011–2015. Using robust panel regression, we find board capital is important in making Vietnamese bank efficient even after controlling its endogeneity issue. This study further documents that networking capital and experience capital are the important factors, but not education for bank efficiency. The findings of this research contribute to the entrenchment hypothesis in agency theory, where networking and experience can be the bargaining power for manager (agent) in securing their compensation. It also contributes to human capital theory and resource base view theory where it shows networking and experience are stratetic human capital resources for bank efficiency. The findings imply that shareholders should consider the networking and experience of board members during board elections. Future research may engage with the intervention of corporate governance monitoring or test it in other developing countries context.

A framework for board capital

2016 ◽  
Vol 16 (3) ◽  
pp. 452-475 ◽  
Author(s):  
Leticia Pérez-Calero ◽  
Ma del Mar Villegas ◽  
Carmen Barroso
Keyword(s):  
Social Capital ◽  
Human Capital ◽  
Firm Performance ◽  
Stock Exchange ◽  
Board Members ◽  
Board Density ◽  
Content Type ◽  
Board Capital ◽  
Complete Set ◽  
External Connections

Purpose The purpose of this paper is to examine in greater depth the concept of “board capital”, which the authors consider to be a bundle of three types of capital, and believe to be a clear antecedent of the board’s ability to perform its roles, which have positive consequences for the firm’s performance. Design/methodology/approach Through 83 firms listed on The Madrid Stock Exchange during the period 2005-2010, the authors test empirically the relationships between different dimensions of board capital and firm performance, and specially how internal social capital moderates the relationships between board human capital and external social capital with firm performance. Findings The results show that certain characteristics of human capital (average board tenure) and external social capital (directors’ interlocks) are positively related to the firm performance. The empirical findings also indicate that the internal social capital, measured by board density, is positively related to the firm performance and moderates these above relationships, increasing the potential of the resources contributed by the board members and influencing to a large extent on a firm’s performance. Practical implications The results of the investigation will help both executives and scholar in two ways. First, they will assist firms when they have to select board members, as they can now understand how the resources that board members bring with them can affect the firm performance. To be more effective, boards need to have members that have experience as firm’s directors, external connections to other boards and many internal ties among them. Second, in this context, internal social capital is especially relevant, so the firms should look for possible ways of encouraging internal ties between directors. In this paper, the authors have opted for study the participation of directors in committees. Originality/value The authors propose that these three types of capital (human, external and internal social capital) need to be synergistically combined to create a group of directors with access to a complete set of skills, knowledge and connections, but which can still work as a compact social group when making decisions.

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.

A Study of the Long-Term Value of Capabilities-Based Resources, Intangible Strategic Assets, and Firm Performance

2014 ◽  
Author(s):  
Brian R. Chabowski ◽  
G. Tomas M. Hult
Keyword(s):  
Production Capacity ◽  
High Tech ◽  
Firm Level ◽  
Strategic Resources ◽  
Strategic Assets ◽  
Lagged Effects ◽  
Marketing Expenditures ◽  
And Performance ◽  
Innovation Impact

How do capabilities-based resources focused on customers, supply chains, and how does innovation impact a firm’s strategic assets and performance? We develop a framework to (1) test strategic resource allocations as investments in future opportunities, (2) examine the influences of strategic resources on strategic assets, and (3) study the effects of strategic assets on performance. The model incorporates data from a 12-year period to examine the lagged effects over a “strategic” length period. The results show that the resources that affect assets include business-to-customer (B2C) marketing expenditures, sourcing attentiveness, inventory readiness, production capacity, and overall innovation creativity. Customer satisfaction and brand equity are two firm-level strategic assets that influence financial performance. The robustness of the overall results was also examined in two technological contexts (low/stable vs. high tech).

scholarly journals Quality of governance and the construction of governance indices: evidence from Spain

2007 ◽  
Vol 5 (1) ◽  
pp. 355-371
Author(s):  
Eloisa Pérez de Toledo ◽  
Evandro Bocatto
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Investor Protection ◽  
Extensive Literature ◽  
Firm Level ◽  
Public Companies ◽  
Corporate Governance Mechanisms ◽  
And Performance ◽  
Future Growth

Corporate governance is a set of mechanisms relevant to economic efficiency since it can minimize agency problems. The question is to determine how governance and firm performance interact. Recent research shows that firm-level corporate governance mechanisms are more important in countries with low investor protection, suggesting that firms can partially compensate for ineffective legal environments. Within this context, the objective of this paper is to construct a robust proxy for quality of corporate governance for the Spanish public companies. Thus, after providing an extensive literature review on the field of corporate governance and its interaction with firm performance, we construct a governance index (GOV-I) for a sample of 97 Spanish non-financial public companies. Finally, we assess the determinants of governance in the case of Spain. The results show a significant relationship between governance and performance, future growth opportunities and size, demonstrating that Spanish firms adopt better standards of governance to compensate for the low level of investor protection holding in the country.

scholarly journals What Makes Employees Productive and Have High Performance? Human Capital Investment in Universities

2020 ◽  
pp. 21-36
Author(s):  
Fitri Nurmahmudah ◽  
Eka Cahya Sari Putra
Keyword(s):  
Human Capital ◽  
Capital Investment ◽  
High Performance ◽  
Evaluation Method ◽  
Net Present Value ◽  
Pearson Correlation ◽  
Human Capital Investment ◽  
Correlation Technique ◽  
And Performance ◽  
High Level

The study describes the evaluation results concerning the improvement of the education levels among the employees of a university in Indonesia by making an investment in education. The study is aimed at investigating the employees’ productivity and performance after making an investment in education. This study with evaluation method using discrepancy model. The sample of the study consisted of 255  non-academic university employees. Data were collected by way of a questionnaire on Guttmann scale. The questionnaire was validated by using logical and empirical validation by a Pearson correlation technique and reliability by KR-20 technique. The data analysis with descriptive. To calculate the capital human investment, the human capital investment formula was used for finding payback period, benefit/cost ration, return-on-investment, net-present-value, and internal-rate-of-return. The results of the study showed that the employees who made human capital investment in education were able to increase their productivity and performance as their insights, knowledge, and skills improved. The research findings were able to give insights to leaders in high-level institutions or government institutions that investing in education is truly essential, needs more attention, and needs to be done by employees.

Enhancing foreign subsidiaries' performance through relational ties, market- and nonmarket-based capabilities

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Amonrat Thoumrungroje ◽  
Supara Kapasuwan
Keyword(s):  
Firm Performance ◽  
Multinational Enterprises ◽  
Social Capital Theory ◽  
Superior Performance ◽  
Foreign Subsidiaries ◽  
Capital Theory ◽  
Content Type ◽  
Mediating Role ◽  
Path Analyses ◽  
And Performance

PurposeGiven the inconclusive findings on relational ties–performance relationships, this study approaches this phenomenon through social capital theory and resource-based view (RBV) lenses to advocate the mediating role of nonmarket- and market-based capabilities.Design/methodology/approachA survey-based research methodology was employed. A list of 1,425 foreign subsidiaries was identified from the Thailand Board of Investment (BOI) website, and key informants were contacted. A final response rate of 11.8% was achieved. All hypotheses were tested via path analyses with the bootstrapping technique.FindingsThe results indicate that the relationships between business- and government-relational ties and performance are fully mediated by market- and nonmarket-based capabilities with the latter serving as essential but inadequate preconditions for achieving superior firm performance.Practical implicationsTo mitigate the liability of foreignness and to enhance performance of foreign subsidiaries operating in volatile emerging economies such as Thailand, government and business relational ties are crucial in developing nonmarket- and market-based capabilities. The nonmarket-based capabilities entail the ability to negotiate with and influence policy makers, which in turn helps augment the development of market-based capabilities, including the ability to be highly responsive to customers' needs.Originality/valueThis research illustrates the embedded roles of nonmarket and market-based capabilities developed through complex interactions among social actors, including the multinational enterprises’ (MNEs’) subsidiaries and government and nongovernment counterparts, in attaining superior performance. The results indicate how relational ties enable MNEs’ subsidiaries to develop various capabilities, and how these capabilities are related with each other and linked to firm performance. Findings from an emerging economy undergoing recent political and economic uncertainties also provide theoretical advancements for international business studies.

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