Management or market variables in the assessment of corporate performance? Evidence on a bank-based system

Published date29 March 2022
Date29 March 2022
Subject MatterAccounting & finance,Accounting/accountancy,Accounting methods/systems
AuthorMaria Elisabete Neves,Elisabete Vieira,Zélia Serrasqueiro
Management or market variables
in the assessment of corporate
performance? Evidence on a
bank-based system
Maria Elisabete Neves
Polytechnic of Coimbra, Coimbra Business School Research CentrejISCAC,
Coimbra, Portugal and Centre for Transdisciplinary Development Studies,
University of Tr
as-os-Montes and Alto Douro, Vila Real, Portugal
Elisabete Vieira
GOVCOPP Unit Research, ISCA-UA, University of Aveiro, Aveiro, Portugal, and
Zélia Serrasqueiro
Departamento de Gestão e Economia Docente do Departamento de Gestão e
Economia, Universidade of Beira Interior, Covilhã, Portugal
Purpose This paper aims to study the inf‌luence of some company-specif‌ic characteristics, corporate
governancefactors and macroeconomic factors on the Portuguese companiesperformance.
Design/methodology/approach To achieve this aim, the authors have used data from 39 Euronext
Lisbon companies for the period between 2014 and 2019. The authors used panel data methodology, specif‌ically the
generalized method of moments estimation method by Arellano and Bover(1995) and Blundell and Bond (1998).
Findings The results point out that the sign and signif‌icance of the determinants of corporate
performance change depending on thevariable used to measure performance. The Tobins Q variable, as a
market variable and variable of interest to potential investors, is explained by some corporate governance
variables and company-specif‌icfactors. Specif‌ically, potential investors are conf‌identin the leadership power
of the chief executive off‌ice (CEO)and the members of the Board of Directors, which contributes positivelyto
corporate performance. However, the f‌irmsage has a negative impact on Tobins Q. Considering an
accounting variable managed internally by the organizations, the results show that return on assets is
negatively inf‌luenced by leverage, and positively affected by CEO duality, which the manager believes is
decisiveto maintainperformance levels.
Originality/value To the best of the authorsknowledge, this study is the f‌irst to analyze specif‌ic
characteristics of companies and corporate governance factors, in a specif‌ic macroeconomic environment of
high dependenceon banking, considering the nonlinear effectof company age on company performance.
Keywords Corporate performance, Euronext Lisbon, GMM system
Paper type Research paper
1. Introduction
According to the traditional literature, there are several ways to measure corporate
performance without knowingin detail which of them is the best for different stakeholders.
This work is supported by national funds, through the Fundação para a Ciência e Tecnologia
Portuguese Foundation for Science and Technology under the project UIDB/04011/2020.
Received13 December 2021
Revised1 February 2022
Accepted3 March 2022
InternationalJournal of
Accounting& Information
Vol.30 No. 3, 2022
pp. 372-390
© Emerald Publishing Limited
DOI 10.1108/IJAIM-12-2021-0251
The current issue and full text archive of this journal is available on Emerald Insight at:
Is an investor interested in the same performance factors as a manager? Which variables
best serve the objectives and the interests of the investor as well as of the manager?
Realizing whetherthese differences actually exist is our primary objective.
According to Hunjra et al. (2020), the variables of social responsibility and corporate
governance can play a preponderantrole in the variation of stock prices (a measure that can
be used as a measure of business performance). Considering the Portuguese market, Vieira
et al. (2019) also show that specif‌iccorporate governance and macroeconomic characteristics
can inf‌luence the performanceof companies, concluding that the sign and signif‌icance of the
variables can vary dependingon the dependent variable used.
Given the growing interestin this topic, primarily due to the need of companies to adjust
to new social and environmental impositions,we propose to analyze the impact that certain
factors, specif‌ic characteristics of companies, corporate governance and macroeconomic
factors have on the performance of Portuguese companies. To achieve this aim, we have
used three distinct performance variables, one based on accounting data and the others
based on market data. Our results suggest that return on assets (ROA) is a management
variable par excellence and that its determinants are those to which the manager gives more
importance. Regardingthe two market variables, the results interestingly suggestthat while
the Tobins Q can be understood as a variable of interest to potential long-term investors,
concerned with the future companys growth, the stock return is a variable of interest to
investors who are already in the market. Specif‌ically, the results suggest that a potential
investor is conf‌ident in the leadership power of the chief executive off‌ice (CEO) and the
members of the Board of Directors. The nonlinear relationship between company age and
growth opportunities (Tobins Q) shows that, until reaching cruising speed, potential
investors considerthat age negatively inf‌luences the growth opportunities.
The manager, internal to the organization, is much more concerned with the amount of
interests and capital amortization that debt may imply, as this can compromise the
companysprof‌itability. In addition, the manager believes in reinforcing the CEOs
leadership when he/she is also Chairman, and that this will help him to make the best
decisions to improve performance. On the other hand, the current investor, interested in
stock return as a performance measure, is convinced that this duality only creates
uneasiness in the company becausethe CEO can decide much more in terms of the long-term
as Chairman than intending to improve the companys value on the market, year by year.
This nature of investors is still concerned with social well-being and believes that more
benef‌its to employees bringmore motivation and better performance levels.
The main contributions of this work are the following: f‌irst, we emphasize that the
performance measurement variablemust be chosen considering the preferences of different
stakeholders; second, we analyze performance in three distinct perspectives; third, we
consider a bank-basedsystem country, which requires research; fourth, it is noted thatROA,
as an accounting and managementvariable, is of fundamental interest to those who manage
the company internally. The fact that ROA seems a better measure of performance can be
associated with the fact that we are considering a country whose capital market is not a
developed one. Finally, the difference between external, current and potential investors is
clearly perceived when using the stock return versus Tobins Q variables. In this way, we
believe that this work can be appreciated not only by managers and investors but also by
academics or civil society.
This paper is structured as follows: Section 2 presents the literature review and
formulates the hypotheses to be tested. Section 3 presents the research design, describing
the sample, models and estimation method.In Section 4, the main results are presented and
or market

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT