This document discusses a study on the relationship between knowledge management, risk management, and company performance in the financial sector in Thailand. The study aims to incorporate risk management into the framework for analyzing how knowledge management impacts company performance. It reviews literature on intellectual capital, knowledge management, and their links to performance. It also looks at studies on risk management and performance. The proposed model will measure intellectual capital efficiency using VAIC and analyze its relationship to risk management and company financial indicators to provide managers a way to assess long-term value.
Corporate Governance on Earnings Management in Listed Deposit Money Bank in N...ijtsrd
The increase in the manipulation of accounting records and collapse of some Nigerian Deposit Money Banks have left question in the mind of researchers on the role of corporate governance. This paper was carried out to examine the impact of corporate governance attributes on earnings management of listed Deposit Money Banks from 2009 to 2017. The study used a sample size of thirteen 13 banks. The dependent variable was measured using Discretionary Loan Loss Provision Model by Chang, Shen and Fang 2008 . Correlational design was employed the secondary data was obtained from the annual reports of the firms and Nigerian Stock Exchange website. The results from the multiple regression analysis proved that board size has positive and significant impact on earnings management board independence has negative and significant impact on earnings management while board of directors' ownership has insignificant impact on earnings management. The study concludes that effective monitoring role of independence directors will constrain the opportunistic behavior by managers. The paper therefore recommends among others that banks should increase the numbers of independent directors on the board to improve their monitoring effectiveness. Olaleye John Olatunde | Amafa Etupu Oluwafunmilayo "Corporate Governance on Earnings Management in Listed Deposit Money Bank in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-1 , December 2019, URL: https://www.ijtsrd.com/papers/ijtsrd29515.pdfPaper URL: https://www.ijtsrd.com/management/other/29515/corporate-governance-on-earnings-management-in-listed-deposit-money-bank-in-nigeria/olaleye-john-olatunde
An Empirical Analysis on the Nature of Relationship between Capital Structure...iosrjce
The financing decision with regard to capital structure theory of finance has been a topic of many
theories and their conflicting output for past many years. This paper aims to analyse the nature of relationship
between the capital structure of a firm and its performance. The data of 40 firms excluding financial services
firms listed on Nifty indices on National Stock Exchange is studied (The composition of 50 firms on Nifty
represents a well branch out index reflecting precisely the overall market conditions). Financial services firms
have been excluded from purview of this paper, as they are in the business of collecting money and investing in
financial assets rather than producing goods, hence follow a unique business valuation model. Further financial
services sector being one of the most sensitive sectors. This paper analyzes a period of 13 years (2001-2014)
covering the phases of a business cycle starting from boom (2001/02-2006/07), recession (2007/08-2008/09)
and then recovery (2009/10-2013/14). The complete business cycle will aid to demonstrate the results more
accurately. This paper also surveys the topical developments in the empirical capital structure research. The
data for a period of 13 years is analysed using descriptive statistics, correlation and multiple regression
techniques. For research purpose, the ratios such as debt-equity ratio, debt-asset ratio and long term debt are
taken as independent variables whereas Net Profit, Net Profit Margin, ROCE, ROE and ROA are the ratios
taken as dependent variables.
Corporate Governance on Earnings Management in Listed Deposit Money Bank in N...ijtsrd
The increase in the manipulation of accounting records and collapse of some Nigerian Deposit Money Banks have left question in the mind of researchers on the role of corporate governance. This paper was carried out to examine the impact of corporate governance attributes on earnings management of listed Deposit Money Banks from 2009 to 2017. The study used a sample size of thirteen 13 banks. The dependent variable was measured using Discretionary Loan Loss Provision Model by Chang, Shen and Fang 2008 . Correlational design was employed the secondary data was obtained from the annual reports of the firms and Nigerian Stock Exchange website. The results from the multiple regression analysis proved that board size has positive and significant impact on earnings management board independence has negative and significant impact on earnings management while board of directors' ownership has insignificant impact on earnings management. The study concludes that effective monitoring role of independence directors will constrain the opportunistic behavior by managers. The paper therefore recommends among others that banks should increase the numbers of independent directors on the board to improve their monitoring effectiveness. Olaleye John Olatunde | Amafa Etupu Oluwafunmilayo "Corporate Governance on Earnings Management in Listed Deposit Money Bank in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-1 , December 2019, URL: https://www.ijtsrd.com/papers/ijtsrd29515.pdfPaper URL: https://www.ijtsrd.com/management/other/29515/corporate-governance-on-earnings-management-in-listed-deposit-money-bank-in-nigeria/olaleye-john-olatunde
An Empirical Analysis on the Nature of Relationship between Capital Structure...iosrjce
The financing decision with regard to capital structure theory of finance has been a topic of many
theories and their conflicting output for past many years. This paper aims to analyse the nature of relationship
between the capital structure of a firm and its performance. The data of 40 firms excluding financial services
firms listed on Nifty indices on National Stock Exchange is studied (The composition of 50 firms on Nifty
represents a well branch out index reflecting precisely the overall market conditions). Financial services firms
have been excluded from purview of this paper, as they are in the business of collecting money and investing in
financial assets rather than producing goods, hence follow a unique business valuation model. Further financial
services sector being one of the most sensitive sectors. This paper analyzes a period of 13 years (2001-2014)
covering the phases of a business cycle starting from boom (2001/02-2006/07), recession (2007/08-2008/09)
and then recovery (2009/10-2013/14). The complete business cycle will aid to demonstrate the results more
accurately. This paper also surveys the topical developments in the empirical capital structure research. The
data for a period of 13 years is analysed using descriptive statistics, correlation and multiple regression
techniques. For research purpose, the ratios such as debt-equity ratio, debt-asset ratio and long term debt are
taken as independent variables whereas Net Profit, Net Profit Margin, ROCE, ROE and ROA are the ratios
taken as dependent variables.
Financial Structure and the Financial Performance of Quoted Consumer Goods Fi...ijtsrd
The study investigated the effect of financial structure on the financial performance of quoted consumer goods firms in Nigeria. The study used profit after tax PAT to represented financial performance as the dependent variable while financial structure was disintegrated into Short Term Debt STD , Long Term Debt LTD , share capital SC and retained earnings RE as the independent variable. The data for the study were obtained from the Financial Statement and Annual Reports of the selected firms. The data set comprised fifty 50 observations comprising five year time series data spanning 2010 to 2019 from ten firms in the consumer goods sector. The panel regression technique based on Fixed and Random Effects were used for data analyses. The Hausman test showed that the Fixed Effect model is more suitable for the study. The findings revealed that STD and SC have significant positive effects on the PAT of consumer goods firms in Nigeria while LTD and RE were found to have positive but no significant effect on the PAT of consumer goods firms in Nigeria. The study conclude that b working capital management is an efficient tool for the consumer goods subsector in Nigeria. Among the contributions of the study is the use of all the four sources of funds and the use of profit after tax that tends to capture the overall effect of the various fund sources on the holistic profitability of the consumer goods firms. The recommendations included use of share capital for long term investment and working capital management for operations. Daniel, Prince Chinwendu | Dr. Joseph A. Nduka "Financial Structure and the Financial Performance of Quoted Consumer Goods Firms in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-1 , December 2020, URL: https://www.ijtsrd.com/papers/ijtsrd37967.pdf Paper URL : https://www.ijtsrd.com/management/accounting-and-finance/37967/financial-structure-and-the-financial-performance-of-quoted-consumer-goods-firms-in-nigeria/daniel-prince-chinwendu
External Business Environment and Performance of Microfinance Institutions: E...AkashSharma618775
This study examined the intensity of competition in the microfinance industry and its relationship
performance of MFIs in Nigeria. From a sample of 121 MFIs in Nigeria, data was collected via a structured
questionnaire. Data collected was analyzed via Partial Least Squares Structural Equation Modeling (PLS-SEM
3.0) using the Statistical Package for Social Science (SPSS v22) and, findings suggest that MFIs were faced with
intense competition in the form of high cost and difficulty of entry, high operational cost and too many players in
the industry regardless of the type of product and services they offer or lending policies they embrace. The result
further reveal that the intensity of competition has significant negative influence on the amount of loans disbursed
and the amount disbursed to women. The study therefore recommends MFI managers to develop operational
mechanisms for cost and risk reduction to survive and excel.
Corporate debt policy remained a significant, but a challenging decision for managers entrusted with the responsibility to improve the value of the firm. Thus, this study examines the factors influencing the capital structure decisions of firms in Nigeria. The study employs a panel data regression model to analyze data from firms in Nigeria for the period 2011 to 2015. The result of the empirical analysis reveals that firms in Nigeria have a preference to finance economic operations from retained earnings and the use of short-term debt on rollover basis. The finding of this study confirms that debt decreases with profitability and growth opportunities. The findings show that asset tangibility and firm size have a positive and significant relationship with debt policy of firms in Nigeria. The analysis also reveals that managerial ownership has a negative and significant relationship with debt ratio of firms in Nigeria. The study shows a non-significant positive relationship between non-debt tax shields and debt. The study demonstrates that the trade-off and pecking order theories both explains the factors influencing capital structure decisions of firms in Nigeria. Therefore, this study suggests the need for stakeholders to develop the financial markets and make it accessible for firms to obtain long-term financing for economic growth and development.
How Intellectual Capital Effects Firm’s Financial PerformanceHendra Gunawan
This study examined the effect of intellectual capital on the financial performance of the company. Independent variables consisted of structural capital efficiency (SCE), human capital efficiency (HCE), capital employed efficiency (CEE) control variables used in this research are the size and leverage. The population of this study are non-financial companies listed on the Indonesian Stock Exchange (BEI) 2014. Samples were selected using purposive sampling method and obtained 232 companies. This study using simple regression analysis and descriptive statistics for the analysis of the data processed by SPSS 22. Results showed that HCE has negative effect on the financial performance, SCE has significant positive effect on financial performance, and CEE has significant positive effect on financial performance. The limitation in the study is sample that are used only limited to the non-financial sector companies listed on the Indonesia Stock Exchange 2014. Future studies are expected to use other measurements to measure intellectual capital and value of the company, and further research is also expected to increase the research data and select other industrial sectors.
Mergers and Acquisitions in Indian Banking Sector A Case of Bharat Overseas B...ijtsrd
Mergers and Acquisitions MandAs continue to be a significant force in the restructuring of the financial services industry. The Indian Commercial Banking Sector, which has played a pivotal role in the country’s economic development, is currently passing through an exciting and challenging phase. The present research papers studies the impact of MandA on the financial performance of Bharat Overseas Bank and Indian Overseas Bank. The study uses key financial ratios to find the impact of MandA on financial performance of selected banks. Dr. Soniya Gambhir "Mergers and Acquisitions in Indian Banking Sector (A Case of Bharat Overseas Bank and Indian Overseas Bank)" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-2 , February 2021, URL: https://www.ijtsrd.com/papers/ijtsrd38415.pdf Paper Url: https://www.ijtsrd.com/management/accounting-and-finance/38415/mergers-and-acquisitions-in-indian-banking-sector-a-case-of-bharat-overseas-bank-and-indian-overseas-bank/dr-soniya-gambhir
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
Financial Structure and the Financial Performance of Quoted Consumer Goods Fi...ijtsrd
The study investigated the effect of financial structure on the financial performance of quoted consumer goods firms in Nigeria. The study used profit after tax PAT to represented financial performance as the dependent variable while financial structure was disintegrated into Short Term Debt STD , Long Term Debt LTD , share capital SC and retained earnings RE as the independent variable. The data for the study were obtained from the Financial Statement and Annual Reports of the selected firms. The data set comprised fifty 50 observations comprising five year time series data spanning 2010 to 2019 from ten firms in the consumer goods sector. The panel regression technique based on Fixed and Random Effects were used for data analyses. The Hausman test showed that the Fixed Effect model is more suitable for the study. The findings revealed that STD and SC have significant positive effects on the PAT of consumer goods firms in Nigeria while LTD and RE were found to have positive but no significant effect on the PAT of consumer goods firms in Nigeria. The study conclude that b working capital management is an efficient tool for the consumer goods subsector in Nigeria. Among the contributions of the study is the use of all the four sources of funds and the use of profit after tax that tends to capture the overall effect of the various fund sources on the holistic profitability of the consumer goods firms. The recommendations included use of share capital for long term investment and working capital management for operations. Daniel, Prince Chinwendu | Dr. Joseph A. Nduka "Financial Structure and the Financial Performance of Quoted Consumer Goods Firms in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-1 , December 2020, URL: https://www.ijtsrd.com/papers/ijtsrd37967.pdf Paper URL : https://www.ijtsrd.com/management/accounting-and-finance/37967/financial-structure-and-the-financial-performance-of-quoted-consumer-goods-firms-in-nigeria/daniel-prince-chinwendu
External Business Environment and Performance of Microfinance Institutions: E...AkashSharma618775
This study examined the intensity of competition in the microfinance industry and its relationship
performance of MFIs in Nigeria. From a sample of 121 MFIs in Nigeria, data was collected via a structured
questionnaire. Data collected was analyzed via Partial Least Squares Structural Equation Modeling (PLS-SEM
3.0) using the Statistical Package for Social Science (SPSS v22) and, findings suggest that MFIs were faced with
intense competition in the form of high cost and difficulty of entry, high operational cost and too many players in
the industry regardless of the type of product and services they offer or lending policies they embrace. The result
further reveal that the intensity of competition has significant negative influence on the amount of loans disbursed
and the amount disbursed to women. The study therefore recommends MFI managers to develop operational
mechanisms for cost and risk reduction to survive and excel.
Corporate debt policy remained a significant, but a challenging decision for managers entrusted with the responsibility to improve the value of the firm. Thus, this study examines the factors influencing the capital structure decisions of firms in Nigeria. The study employs a panel data regression model to analyze data from firms in Nigeria for the period 2011 to 2015. The result of the empirical analysis reveals that firms in Nigeria have a preference to finance economic operations from retained earnings and the use of short-term debt on rollover basis. The finding of this study confirms that debt decreases with profitability and growth opportunities. The findings show that asset tangibility and firm size have a positive and significant relationship with debt policy of firms in Nigeria. The analysis also reveals that managerial ownership has a negative and significant relationship with debt ratio of firms in Nigeria. The study shows a non-significant positive relationship between non-debt tax shields and debt. The study demonstrates that the trade-off and pecking order theories both explains the factors influencing capital structure decisions of firms in Nigeria. Therefore, this study suggests the need for stakeholders to develop the financial markets and make it accessible for firms to obtain long-term financing for economic growth and development.
How Intellectual Capital Effects Firm’s Financial PerformanceHendra Gunawan
This study examined the effect of intellectual capital on the financial performance of the company. Independent variables consisted of structural capital efficiency (SCE), human capital efficiency (HCE), capital employed efficiency (CEE) control variables used in this research are the size and leverage. The population of this study are non-financial companies listed on the Indonesian Stock Exchange (BEI) 2014. Samples were selected using purposive sampling method and obtained 232 companies. This study using simple regression analysis and descriptive statistics for the analysis of the data processed by SPSS 22. Results showed that HCE has negative effect on the financial performance, SCE has significant positive effect on financial performance, and CEE has significant positive effect on financial performance. The limitation in the study is sample that are used only limited to the non-financial sector companies listed on the Indonesia Stock Exchange 2014. Future studies are expected to use other measurements to measure intellectual capital and value of the company, and further research is also expected to increase the research data and select other industrial sectors.
Mergers and Acquisitions in Indian Banking Sector A Case of Bharat Overseas B...ijtsrd
Mergers and Acquisitions MandAs continue to be a significant force in the restructuring of the financial services industry. The Indian Commercial Banking Sector, which has played a pivotal role in the country’s economic development, is currently passing through an exciting and challenging phase. The present research papers studies the impact of MandA on the financial performance of Bharat Overseas Bank and Indian Overseas Bank. The study uses key financial ratios to find the impact of MandA on financial performance of selected banks. Dr. Soniya Gambhir "Mergers and Acquisitions in Indian Banking Sector (A Case of Bharat Overseas Bank and Indian Overseas Bank)" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-5 | Issue-2 , February 2021, URL: https://www.ijtsrd.com/papers/ijtsrd38415.pdf Paper Url: https://www.ijtsrd.com/management/accounting-and-finance/38415/mergers-and-acquisitions-in-indian-banking-sector-a-case-of-bharat-overseas-bank-and-indian-overseas-bank/dr-soniya-gambhir
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
The mediating effect of the information systems use on the relationship betwe...IJAEMSJORNAL
In recent years, research work has increasingly taken a new direction, allowing the analysis of certain intangible factors, in particular information and economic intelligence. On the other hand, at the strategic level, economic information management has become one of the essential drivers of the global performance of companies and nations. To keep abreast of changes, and to contribute to theoretical and practical debates, through our contribution we will try to analyze the relationships which exists between the economic intelligence practices and performance, and then propose a conceptual framework
Intellectual capital: A modern model to measure the value creation in a businessAI Publications
Using a sample of 92 patients, this study looked into the impact of intellectual capital on the efficiency of private hospitals. The researchers used a quantitative approach to assess the effect of Intellectual capital (Human capital, Structural capital, and Relational capital) on long-term competitive advantage in private hospitals in Iraq's Kurdistan region. The research sample was selected using a random sampling method and conducted in various locations across Iraq's Kurdistan province. A total of 110 questionnaires were distributed, but only 92 people correctly completed them. The findings revealed that the most effective relationship with firm success was between human capital as an element of Intellectual capital, while the least effective relationship was between ownership as an element of Intellectual capital. Furthermore, our findings indicate that finance managers should use debts as a last resort in terms of intellectual capital. Finally, our research can be improved by using more controlled variables, a greater sample size, and data from a longer time span in the regression models. Other methods and steps can be used as well.
Running Head ECONOMICS AND ADMINISTRATION1ECONOMICS AND ADMI.docxtodd271
Running Head: ECONOMICS AND ADMINISTRATION 1
ECONOMICS AND ADMINISTRATION 5
ECONOMICS AND ADMINISTRATION
Khalia Hart
Dr. Touhey
MGMT 640 – Financial Decision Making for Managers
March 31, 2019
EXECUTIVE SUMMARY
For the success of every business, there needs to be a strong supporting factor that enforces success. The success of a business indicates that the structure of decision making is tough, strict but at the same time lenient to staff and more importantly customers. Financial management is a very vital factor to consider while engaging in any business activity. Not only is it concerned about customers and staff, but also affects every aspect of the business from managing cash flow and maintaining performance index to developing plans to ensure maximum use of opportunities by business owners. Stakeholders and business owners need to realize the importance of financial management as a tool in business administration since it is the force that ensures continuous development of financial capabilities needed for a business to achieve its full potential.
The macro-economic environment addresses issues concerning behavior. Here are where aAdministrative issues lie. Administration can be categorized into two main categories, administration as a practice and as a science. Administration as a practice mainly addresses the normal routine of business owners and managers and their normal administrative roles in any business entity. Administration as a scientific field is bound to face challenges which are broken down into four main classes. They are discussed fully in this document.
Factors that affect administrative decisions include globalization, cost of control, the relationship between stakeholders and demand on ethical behavior and corporate responsibility. Administrations in different organizations should always be keen to ensure that the named issues are always put under the eye . These factors can greatly affect the performance of a business entity as shall be discussed in this document. Comment by debra touhey: Good start, Khalia. The Executive Summary should explain the problems at hand with potential solutions to those problems. Here is a good reference on writing Executive Summaries:
https://www.inc.com/guides/2010/09/how-to-write-an-executive-summary.html
INTRODUCTION
Since time immemorial, business has always been a very important factor in society. To date, business transactions take place daily through the various business entities that have been established. In the modern world, however, various guidelines, strategies, and tools have been established to ensure that business practices go on smoothly (Robert et al., 2004). Comment by debra touhey: A little too informal for graduate writing
One of the practices that have been developed to ensure maximum productivity in the various entities that have been established, is financial management. The financial management function allows for the planning, organizing, monitori.
Global Financial Outlook during the COVID-19 Pandemic: The role of effective ...AI Publications
The current study's main goal is to look into the relationship between leadership styles and Erbil's financial outlook. Government officials, administrators, and leaders of large companies and organisations make critical decisions on a regular basis and expect positive outcomes in achieving their goals. 130 participants were involved in the present study. The results revealed that the highest value among all leadership styles was charismatic leadership. According to the research findings, there are more to uncover on the subject of leadership styles and Financial outlook in Erbil. A bigger sample size and including all the key races in Erbil would provide support for further studies.
Study of the Static Trade-Off Theory determinants vis-à-vis Capital Structure...inventionjournals
This paper investigates the application of the Static Trade-Off theory regarding the capital structure of the Pakistani Chemical Industry. We have used panel data analysis for the sample of 31 listed chemical firms from the period 2005 to 2013. The study is unique in its type as unlike to Shah & Hijazi (2005) who studied many industrial sections, this study only focuses on the listed Chemical Firms. We used five independent variables such as Profitability (P), Tangibility (T), Liquidity (L), Firm Size (FS) and Total Assets Growth (TAG) to study the effect on independent variable Financial Leverage (FG). The results confirmed the relationship of Profitability, Liquidity and Firm Size. However the results were not confirmed for Tangibility and Firm Assets Growth. Even though the results for Tangibility were positive, however the significance of the coefficients failed to support the hypothesis. This study hold a unique position for researchers for future research and also has significance for the investors helping them to make wise investment decisions when investing in Pakistani Chemical Industry since this industry holds a major portion of industrial GDP of the country
Impact of corporate governance on firm performance publishedMuhammad Usman
In the light of corporate financial scandals, there is an increasing attention on corporate governance issues. The investors look for emerging economies to diversify their investment portfolios to exhaust the possibilities of returns. This paper examines the impact of corporate governance variables on firms’ performance. This Research found that there is a direct positive relationship between profitability measured either by Earnings per share (EPS) or Return on assets (ROA) and corporate governance, also have a positive direct relationship between each of liquidity, dividend per share, and the size of the company with corporate governance, finally the study found a positive direct relationship between corporate governance and corporate performance. Various studies have been conducted in developing countries including Pakistan to investigate the relationship among corporate governance and firm performance. This study indicates that corporate governance can be measured through the following elements.
(1) board size (2) Female Member (3) CEO duality (4) Education of Directors (5) Board working experience(6) independent directors (7) board compensation (8) Board ownership (9) Audit committee (10) Board composition(11)Leadership Structure
Impact of corporate governance on firm performance publishedMuhammad Usman
In the light of corporate financial scandals, there is an increasing attention on corporate governance issues. The investors look for emerging economies to diversify their investment portfolios to exhaust the possibilities of returns. This paper examines the impact of corporate governance variables on firms’ performance. This Research found that there is a direct positive relationship between profitability measured either by Earnings per share (EPS) or Return on assets (ROA) and corporate governance, also have a positive direct relationship between each of liquidity, dividend per share, and the size of the company with corporate governance, finally the study found a positive direct relationship between corporate governance and corporate performance. Various studies have been conducted in developing countries including Pakistan to investigate the relationship among corporate governance and firm performance. This study indicates that corporate governance can be measured through the following elements.
(1) board size (2) Female Member (3) CEO duality (4) Education of Directors (5) Board working experience(6) independent directors (7) board compensation (8) Board ownership (9) Audit committee (10) Board composition(11)Leadership Structure
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Knowledge management on company performance with risk management analysis evidence from financial sector in thailand
1. European Journal of Business and Management www.iiste.org
ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)
2839
Vol 4, No.12, 2012
Knowledge Management on Company Performance with Risk
Management Analysis: Evidence from financial sector in Thailand
Pawasut Sutjaritwattana
Bualuang Securities PLC., Thailand
Email: Warrant16@hotmail.com
Abstract
There has been increased interest in the application of Knowledge Management (KM) in managerial issues as a
way of demonstrating the field's value. There are studies regarding company performance which hav been have
broadly used among researchers. Recognized models can be considered as the economic activity revealed in a
company’s financial statements by considering three input dimensions, Human Capital (HC), Structural Capital
(SC) and Capital Employed (CE). Through this model, knowledge assets can be linked with operating (ROA)
Through
and financial performance (ROE). However, there are still other factors that impact company productivity;
these are considered as intangible risk management. Intangible risk management identifies a type of risk that
management
occurs, but is ignored by the organization due to a lack of identification ability. These risks may lessen the
knowledge workers’ productivity, decrease cost effectiveness, profitability, service, quality, reputation, brand
value, and earnings quality.
This paper argues that Knowledge Management research fails to identify and provide a detailed understanding of
the role of risk management in improving a company’s performance. This study suggests that the framework of
Knowledge Management on Company Performance should be incorporated with risk management. Instead of
edge
focusing exclusively on the nature and attributes of financial knowledge and the management of learning,
research should also direct attention to the risk management factors that mitigate undesirable effects and
management
contribute to benefit optimization from the variations in business environments. This paper extends the model
analysis to measure VAICTM and provides a deeper investigation of the relationship between inte intellectual capital,
risk management and a company’s performance. The model provides managers with a way to measure
company performance on Knowledge Management together with organizational risk by responding to
organizational awareness of profitability consi
consistent for sustaining the long-term value of the company.
term
Keyword: Knowledge Management, Knowledge Asset, Risk Management, Company Performance, Intellectual
:
Capital
1. Introduction
With the world moving toward globalization, many businesses have had to develop and become more complex.
develop
Many factors drive the global economy and make the world a challenging business environment with complex
implications for most courses of action. That makes it difficult for some enterprises to provide products and
services with sufficient margins to stay in business (Wiig, 2004). Utilization of only tangible assets may not be
enough to win business in the long term. Intangible assets or intellectual capital will be another factor that plays
an important role in sustainable business competition. However, it is very difficult to measure the intangible
usiness
assets in monetary form.
Thailand is one of the countries with an emerging market economy. As Thailand is an open economy,
changes in the world’s economy are likely to affect Thailand. So it is very important to be aware of these facts.
Thailand.
Thailand should recognize the importance in the current economy to identify the direction and develop strategies
necessary to reduce the risks that the country may face. The Eleventh National Econo Economic and Social
Development Plan (2012-2016) is a good example of how to develop the economy based on systematic
2016)
knowledge. The financial sector is regarded as the heart of the Thai economy as it is a source of money to
support savings and investments inside the country. Thailand experienced a significant economic crisis in 1997,
inside
referred to as the “Tom Yum Kung Crisis.” This event illustrates that Thailand was not prepared to deal with
such a situation. The Bank of Thailand had to use strict measures to suspend the operations of 16 commercial
suspend
banks and 42 other financial institutions nationwide. Of these 58 entities, only two could eventually recover, and
the remaining 56 entities were permanently closed at the end of 1998. This event taught Thailand to reco recognize
the sensitivity of the financial sector to outside factors such as economic risk, fluctuations of the money market,
or even changes in government policy. The survival and success of a financial organization depends critically on
the efficiency of managing these risks (Khan and Ahmed, 2001). Therefore, the financial sector must be
aging
managed in such a way as to minimize the risks of internal factors in order to be able to withstand external risks
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in the future. However, the problem is how can we manage internal risk. Risk management has been focused on
internal
by the government and the private sector since 1997 after Thailand experienced the economic crisis. Thailand
has reformed and reorganized the financial sector continuously, especially for commercial banks. T The
regulations regarding funds have been changed to accommodate a risk based approach. The guidelines of
risk-based
consolidated supervision have been developed to prevent the risk of high competition from commercial banks
both in Thailand and overseas (Siwasarit, 2010). In terms of financial risk, it can be removed or reduced by using
2010).
the financial model. But the risk of managing intangible assets or intellectual capital is rarely considered because
measuring the value of an intangible asset is difficult. This research is designed to study the relationships
research
between the fluctuation of value added based on the VAICTM method to focus on the efficiency of resources
which create value to the company (Pulic, 2000) and the influences of intangible assets to add value affec affecting
the operating efficiency of the financial institutions registered on the Stock Exchange of Thailand.
The remainder of the paper is organized as follows. In section 2, we briefly discuss and describe the
previous studies. Section 3 shows our framework, explains the study hypotheses and describes all of the
framework,
variables. In section 4, we show and clarify our experiment results. Section 5 summarizes and discusses the
paper.
2. Literature review
2.1 Intellectual Capital and Knowledge Management
Knowledge Management (KM) has been defined as "the process by which an organization creates, captures,
acquires, and uses knowledge to support and improve the performance of the organization” (Kinney, 1998).
According to Sveiby’s description, the definition of knowledge management and intellectual capital is a term
knowledge
that is best defined by its use, and therefore it is probably still correct to regard Intellectual Capital (IC) and
Knowledge Management (KM) as twins - two branches of the same tree. Also, it may be said that Intellectual
Capital deals with articulate, reasonable, knowledgeable and substantial fruits of the mind. It claims intangible
(tacit) and tangible (explicit) dimensions, which are not mutually exclusive, but actually complement each other.
The conversion of knowledge into a valuable asset has come to be known as an intellectual asset or Intellectual
rsion
Capital (Kok, 2007). According to various literature studied, Intellectual Capital may classified as follows
follows:
• Human capital: Most of the researcher agree that human capital represents the individual
knowledge stock of an organisation as represented by its employees (Bontis et al., 2001) and view
it as a combination of: genetic inheritance; education; experience(Hudson,1993)
• Structural capital: the fundamental nature of structural capital is the knowledge rooted within an
fundamental
organization such as business infrastructure/processes, working methods, information systems,
databases, intellectual property (patents, copyrights, trademarks), organizational design, localocation
advantages, corporate culture (Duam, 2005)
• Customer capital and relational capital: The main theme of customer capital is the knowledge
embedded in the marketing channels and customer relationships that an organization develops
through the course of conducting business. Customer capital represents the potential an
conducting
organization has due to ex
ex-firm intangibles (Bontis, 1999).
2.2 Intellectual capital and Company performance
Intangible assets or Intellectual Capital are immaterial resources (not financial assets/financial capital or physical
resources such as fixed/current assets) that, as a factor of production, play a fundamental role in the value
creation process of an enterprise and enable it to compete successfully (Daum, 2005). The association between
Intellectual Capital and company performance has been examined earlier. (e.g. Appuhami, 2007; Bontis, Chu et
al., 2011; Rahman and Ahmed (2012); Saengchan, 2008; Ze´ghal and Maaloul, 2010).
Bontis et al. (2000) revealed a positive relationship between human capital and customer capital. In addition,
human
customer capital has a significant influence on structural capital. Finally, the development of structural capital
has a positive relationship with business performance. Appuhami (2007) studied The Impact of In Intellectual
Capital on Investors’ Capital Gains on Shares: An Empirical Investigation of Thai Banking, Finance & Insurance
Sector. To investigate the impact of corporate value creation efficiency on investors’ capital gains, the author
used the data collected from listed companies in Thailand’s stock market and Public's (1998) Value Added
ed
Intellectual Coefficient as the measure of intellectual capital and a developed multiple regression model. The
empirical research found that companies’ intellectual capital has a significant positive relationship with its
investors’ capital gains on shares. The findings enhance the knowledge base of intellectual capital and develop a
concept of intellectual capital in achieving competitive advantages in emerging economies su as that of
such
Thailand. Likewise a study of Sangchan (2008) applied the VAICTM method to study the relationship between
the efficiency of Intellectual Capital and commercial banks in Thailand. The study found that the efficiency of
total assets (CEE) plays a major role in enhancing the returns; these findings are compatible with those of
Ze´ghal and Maaloul (2010). Wasim et al. (2011) examined the Intellectual Performance (IC) of 12 Modaraba
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companies and its impact on corporate performance by employing the predictive analysis. The empirical results
revealed that one of the important components to strengthen the IC performance is Human Capital Efficiency
(HCE) which means increasing investment to boost the employees’ productivity would increase the human
efficiency of employees. The results show that (both HCE and SCE have significant relationship with financial
iciency
performance (ROE) and (EPS), HCE has significant relationship with financial performance (ROE and EPS),
and SCE has significant relationship with financial performance (ROE) and (EPS) whereas CEE has substantive
financial
effect on ROE and ROI. Even though several studies indicate that intellectual capital plays a significantly
important role in company performance, there are still other studies showing different results. Chu et al. (2011)
different
investigated the impact of intellectual capital on business performance in Hong Kong. They found that there was
no relationship between intellectual capital (Value added intellectual capital) and the business performance
(Market to book value, Return on asset and Asset turnover). Similarly, Similarly, Rahman and Ahmed (2012)
t
investigated associations, first, between a company’s intellectual capital and market value, and second, between
a company’s intellectual capital and financial performance in Bangladesh, selected from three different
financial
industries. They found that intellectual capital and its components do not have significant influence in
determining either the financial performance of a company or its value in the market.
2.3 Enterprise Risk management and Company performance
What is Risk?
When talking about Risk, the first thing that people may think of is the instability of some events in the future. In
fact, Risk and uncertainty differ in many aspects. Uncertainty must be considered in a sense radically distinct
onsidered
from the familiar notion of Risk, from which it has never been properly separated. The essential fact is that
"Risk" means, in some cases, a quantity susceptible to measurement, while at other times it is something
distinctly not of this character; and there are far reaching and crucial differences in the bearings of the
far-reaching
phenomena depending on which of the two is actually present and operating. It would appear that a measurable
uncertainty or "Risk" proper, as we sh use the term, is so far different from an un-measurable one that it is not
shall measurable
in effect an uncertainty at all." (Knight, 1921) The difference between Risk and instability can be illustrated by
comparing it to fighting. The fighter who knows the rules of fighting must find a way or a strategy to win.
fighting
After the first person fight, the opponent must prevent or do something to get the score back. However, if the
other combatant is more skilled, it is possible that he may win the match. Therefore, this situat situation is called
“Risk.” In contrast, if the fighters are not aware of the strategies of the war, they must guess in order to fight one
another. When neither side can prepare a strategy to attack the other, this situation is called “instability.” For
Risk, an individual or organization can make the most effective choice at the acceptable Risk tolerance level to
deal with unexpected problems.
Since the subprime crisis in 2008 businesses have focused attention on risk management, but managing risk
is all about achieving objectives (Woods et al. 2008; Cotter, 2009; Van der Stede, 2009; Palermo, 2011). For the
chieving
organization, the word “enterprise”, according to Enterprise Risk Management (ERM), in itself clearly shows a
different meaning than traditional Risk Management. Enterprise means to integrate or aggregate all types of risks;
Management.
using integrated tools and techniques to mitigate the risks and to communicate across business lines or levels,
compared to Traditional Risk Management (Tahir and Razali, 2011). Even though measuring and evaluating the
though
risk thoroughly within an organization is difficult, because each organization has its own success factors as well
as tangible and intangible asset management, we found studies that examined the relationships between the risk risk,
intellectual capital, and the company performance.
Jafari, Chadegani and Biglari (2011) investigated the association of total risk management and company’s
performance. The results indicated positive and significant relationship between total risk manage management and
company’s performance in companies that have invested in research, development and innovations along with
companies that have a greater level of intellectual capital and industries that have rapid knowledge growth. This
study is compatible with prior research. Andersen (2008) examined the firm specific investment rationale as a
ior firm-specific
plausible explanation for positive risk management effects. As a consequence of the firm firm-specific investment
rationale he found that effective risk management outcomes are associated with superior corporate performance.
Further he indicated that companies that vary in levels of intellectual capital and investment in innovation also
differ in their risk management effects. Therefore, Bannany (2008) investigated the determinan of intellectual
determinants
capital performance in the UK banks. The results indicated that the standard variables, bank profitability and
bank risk, are important. The finding also showed that investment in information technology (IT) systems, bank
efficiency, barriers to entry and efficiency of investment in intellectual capital variables, which have not been
riers
considered in previous studies, have a significant impact on intellectual capital performance.
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3. Methodology and Hypotheses
3.1 Measurement of intellectual capital performance
al
In order to measure the company intellectual capital, the value added intellectual coefficient (VAICTM) model,
developed by Ante Pulic (2000), is employed to appraise the intellectual capital of firms. The better a company’s
resources have been utilized, the higher a company’s value creation efficiency will be (Pulic, 2000). According
s
to Pulic’s models, VAICTM encompasses Human Capital efficiency (HCE), Capital Employed efficiency (CEE)
and Structural Capital efficiency (SCE). Though VAICTM uses accounting data, it does not focus on the cost of
the firm. It does focus on the efficiency of resources that create value to the firm (Pulic 2000, Bornemann 1999,
Appuhami 2007).
VAICTM = HCE + SCE + CEE
VA = OUTPUT – INPUT
OUTPUT = Total Revenue
INPUT = All Expense (Except wage, tax, interest, dividend, depreciation)
HC = Human cost (Conceded as an investment)
SC = Structural capital (VA-HC)
HC)
CA = Capital Employed (Physical Asset + Financial Asset)
HCE = VA/HC
CEE = VA /CE
SCE = SC/VA
3.2 Measurement of risk
In this study, risk is measured as the ex ante instability of a company value added stream. Smoothing the
difference of total revenues and all the expenses incurred in earnings can also come from risk management on a
company’s operations. It is also possible that the link between earnings volatility and earnings predictability
reflects other factors, e.g., earnings smoothing behavior, where managers smooth earnings to provide a more
predictable measure of company performance ( (Dichev & Tang, 2008). This paper used the standard deviation of
value added to represent the business risk. The widely known standard deviation formula is:
∑ (X )
N
2
S = i −X
i =1
N −1
3.3 Dependent variables
In viewing operating performance, the most basic and enormously important ratio to use in evaluating company
performance is ROA and ROE. The return on assets formula and return on equity will enable us to understand
the company’s ability to generate profits from their assets and shareholder equity.
ROA provides the best overall measure of operating performance. Every action that we take will find its
way into the ROA (return on assets) measure; if several things change, this can make it difficult to identify what
is causing the change in ROA. However, when we are trying to assess where we should focus our energy for
improvement, we can control the number of changes proposed. This makes it easy to identify the importance of a
number
particular change. ROA is calculated by the ratio of net income to total assets.
ROE is certainly a “hint” that management is giving shareholders more for their money. It's a basic test of
how effectively a company's management uses investors' money - ROE shows whether management is growing
the company's value at an acceptable rate (McClure, 2010). ROE is calculated by the ratio of profit after tax to
total shareholder equity.
3.4 Samples and Data Collection
To examine the existing hypotheses, we chose a specific industry in order to eliminate the effect of different
levels of human capital, structural capital and relation capital. Secondly, we can infer that the companies, being
in the same sector, cover the structure of similar assets. Therefore, we may presume that the companies within
the same industry should have superior performance, if they have higher competency to manage their intellectual
capital. The population frame for this study is the listed financial institute companies in The Stock Exchange of
this
Thailand (SET) and we collected financial data including return on asset and return on equity in years 2008 until
2010 from SETSMART (The winner of Thailand ICT excellence awards 2010: Knowledge Management
Projects) (TMA, 2011). The data for this study were congregated by using purposive sampling method -
populations with deficient data are omitted from consideration.
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3.5 Hypotheses
The objective of this research is to investigate the impact of the independent variable, intellectual capital and
investigate
variation of value added on the dependent variable, overall business performance, in the financial sector. Thus,
we will investigate the hypotheses as follows:
Ha: There is a meaningful association between VAICTM, Risk (αVA) and financial performance (ROA
association
and ROE) of Financial companies.
Hb: There is a meaningful association between Human Capital Efficiency (HCE), Structural Capital
Efficiency (SCE), Capital Employed Efficiency (CEE) and Risk (αVA) with financial performance
Risk
(ROA and ROE) of Financial companies.
3.6 Research Model
This research applies multiple linear regressions to measure the relationship between the efficiency in operation
of the Thai commercial banks and the value added intellectual coefficient (VAICTM) and the relationship
between the value added and the efficiency of using human capital, structural capital and physical capital. The
impacts from the value added fluctuation of the business affecting the operating efficiency are also studied.
efficiency
ROAa = α + β (VAICTM) + β2 (σVA) + ε
ROEa = α + β (VAICTM) + β2 (σVA) + ε
ROAb = α + β1 (HCE) + β2 (SCE) + β3 (CEE) + β4(σVA) + ε
ROEb = α + β1 (HCE) + β2 (SCE) + β3 (CEE) + β4(σVA) + ε
Where: VAICTM= the value added intellectual coefficient, HCE = Human capital performance as measured by
the ratio of the value added to intellectual capital, CEE = Capital employed performance as measured by the ratio
of the value added to capital employed, ROA = Company profitability as measured by the ratio of ann annual net
income to average total assets, ROE = Relationship between company profitability and stakeholder investment
ome
as measured by the ratio of annual net income to average total equity, β0 = the intercept, β1 = the slope for CEE,
β2 = the slope for HCE, β3 = the slope for SCE, σVA = the standard deviation of value added and ε = the
slope
random error term.
4. Results
Table no.1 shows the descriptive statistics of all variables found from 2008 to 2010. Although the world
economy was weak and fragile because of the financial crisis in the United States, the financial companies in
financial
Thailand were still able to operate very well. The implication is that this was caused by their ROA and ROE
which are performance indicators in operating from two perspectives; efficiency in using assets and efficiency in
profitability that provided some benefits to the shareholders. Both of these had positive values of approximately
3.12% and 6.57% respectively. Therefore, when this is compared to the perspective of using assets in order to
build the value added for the business, this incident indicates that those companies that are in the financial
he
business have mostly gained their advantages from their human capital. So, it can be implicitly stated that in
the era of the knowledge based economy the business owner must build the value added to his/her business by
the
using intellectual assets more than financial assets. In addition, this research study was related to the research
results of Pfeffer (1995), Sveiby (1997), Bontis et al. (2000), Wiig (2003) and Wasim et al. (2011)
(2003)
Table no. 2 shows the correlation coefficient between mean of company performance and value added of
the business in using the advantages from every perspective of the business’s assets by using Pearson correlation
coefficient and also examining the level of significance. It indicates that the correlation coefficient of company
d
performance, value added of intellectual capital and risk from fluctuation of value added is between -0.1 and
0.375. ROE, VAIC and HCE all have a positive relationship with significance of 0.01 and 0.05. These results
show that human resources and intellectual capital could build wealth for share holders while ROA also has a
positive relationship without significance with HCE, CEE and VAIC. Both ROA and ROE have negative
relationships without significance to risk in value added for the business. Nevertheless, negative relationships
could be inferred if we identify and decrease risk. This may help your business’ performance improve. In order
to clarify some confusion, the researcher has performed the Multiple Regression Analysis as shown on the next
table in order to examine the hypothesis.
At the beginning Table 3, the equation of Multiple Regression Analysis was used to examine the
relationship between independent variables and dependent variables. We found that intellectual capital has a
dependent
positive relationship with significance to operating performance, and fluctuation of value added has a negative
relationship with significance to operating performance. However, when studying the relationships between
However,
ROA and factors of VAICTM, we found that each of them have relationships with significance, so the
hypothesis Ha was accepted. We also examined the hypothesis about the relationship of VAICTM and Risk and
how that affected Financial Performance. VAICTM had a positive relationship with significance, while risk had
a negative relationship with significance to financial performance, which accepted the hypothesis Ha at the
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confidence level of 95% and independent variables could explain the transition of dependence variable about
variables
18%. These findings imply that investment in developing human resources, training employees, hiring
competency, information systems, operation processes and managing innovation can create b better resource sector
efficiency than investments in physical or financial assets. Business risk should be the major concern because
if it is decreased, it would increase financial performance. Additionally, enterprise risk management leads to the
ability to adapt in order to deal with change.
5. Conclusion and Suggestions
In this research, we studied Knowledge Management on Company Performance with Risk Management Analysis:
Empirical Study in Thailand. We chose financial companies which were registered on the SET. This empirical
study found that even though the economic system in Thailand is an open economy, it is also sensitive to change
from external factors. During the period of financial crisis in 2008, Thai financial companies were able to
maintain their performance. In addition, business was driven by knowledge assets; human resources in particular
could increase value added for the shareholders. This study supported Appuhami’s research which found that the
Intellectual capital of Thai financial co
companies could build the competitive advantage. When the efficiency in
asset management was considered, we found that the investment in intellectual capital could help to increase
value added to Thai financial companies. Unfortunately, this study could not provide enough information
not
regarding investments in knowledge assets on every perspective, i.e. human capital, structural capital and
financial capital. The results of the research study conflicted with Seangchan’s research in 2008 which found that
the efficiency of total assets (CEE) played a major role in enhancing the returns; both financial and physical
fficiency
assets have been utilized effectively in generating high value returns. When we considered risk management, we
found that risk from fluctuation of value added in financial companies led the negative impacts to the ability of
value
firms’ performance. If businesses could forecast the ability to build value added with certainty, they could
prepare themselves to handle external changes and also improve the efficiency of internal costs. Unfortunately,
efficiency
identifying the risk of knowledge assets was difficult and this study focuses on the knowledge assets of 47 listed
financial companies on The Stock Exchange of Thailand from 2008 to 2010. Additionally, we present onl one only
methodology for measuring the impact of knowledge assets on company performance. Finally, ROA and ROE
ratios were typically estimated for presenting the firm’s performance. Also, this research study measured only
risk from fluctuations of value added. Future research can extend the analysis by testing with other sectors,
added.
designing other methods to measure VAICTM, and choosing other ratios for deeper investigation of the
relationship between intellectual capital and a company’s performance or the appli model in order to measure
applied
other risks to forecast risk of knowledge assets.
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