Capital Structure
Behrooz Badpa; Darioush Akhtarshenas; Amin Ghanbari
Abstract
In this study, the efficiency of the company's value chain was measured using the stochastic frontier function, and then the effect of intellectual capital on value chain efficiency, cash flows, and bankruptcy risk was examined. Although the statistical population of the study included all companies ...
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In this study, the efficiency of the company's value chain was measured using the stochastic frontier function, and then the effect of intellectual capital on value chain efficiency, cash flows, and bankruptcy risk was examined. Although the statistical population of the study included all companies listed on the Tehran Stock Exchange, 142 companies were selected as the statistical sample, and their data were analyzed over an 11-year period (2013-2023). The research hypotheses were tested using structural equation modeling with the SmartPLS software. The findings indicated that, at the 95% confidence level, the company's intellectual capital has a positive effect on value chain efficiency and cash flows, but a negative effect on bankruptcy risk. On the other hand, value chain efficiency increases cash flows while reducing bankruptcy risk.
Introduction
In today's complex and modern economic environment, companies can gain a competitive advantage by optimally utilizing not only tangible assets but also the knowledge, experience, and capabilities of their employees. Firms with higher intellectual capital can adopt favorable strategies to achieve success by leveraging all available resources, thereby enhancing performance and attaining sustainable operational performance. The value-added intellectual coefficient model, which measures the efficiency of intellectual capital, comprises three components: human capital efficiency, structural capital efficiency, and capital employed efficiency. By investing in human capital development, a company can improve the efficiency of its value chain through increased workforce productivity and effectiveness. Similarly, investing in structural capital can enhance value chain efficiency by streamlining processes, reducing waste, and improving communication and collaboration. Moreover, investment in intellectual capital development typically leads to increased returns and value creation, thereby improving the overall quality of the value chain. Based on this, the efficiency of the company's value chain was assessed using stochastic frontier analysis. Subsequently, the impact of intellectual capital on value chain efficiency, cash flows, and bankruptcy risk was examined.
Methodology
Although the research population included all companies listed on the Tehran Stock Exchange, a sample of 142 companies was selected due to limitations in obtaining reliable results. Data from these companies were analyzed over an 11-year period (2013–2023). The research hypotheses were tested using structural equation modeling (SEM) with the SmartPLS software. SEM enables researchers to explore complex relationships among multiple variables simultaneously (Hair et al., 2017). According to the existing literature, companies with higher intellectual capital are expected to perform better across the value chain by leveraging both tangible and intangible assets, resulting in improved cash flows and reduced bankruptcy risk. Additionally, effective value creation throughout the value chain is expected to lower bankruptcy risk and enhance cash flows. Based on this framework, the research proposed the following hypotheses:
Hypothesis 1: The company's intellectual capital has a significant positive effect on the efficiency of its value chain.
Hypothesis 2: The company's intellectual capital has a significant negative effect on its bankruptcy risk.
Hypothesis 3: The company's intellectual capital has a significant positive effect on its cash flows.
Hypothesis 4: The company's value chain efficiency has a significant negative effect on its bankruptcy risk.
Hypothesis 5: The company's value chain efficiency has a significant positive effect on its cash flows.
Results
The research findings, at a 95% confidence level, revealed that intellectual capital positively influences value chain efficiency and cash flows, while negatively affecting bankruptcy risk. Furthermore, value chain efficiency enhances cash flows and reduces the likelihood of bankruptcy. The highest path coefficient is associated with the impact of intellectual capital on the company's cash flows. The impact of intellectual capital on cash flows is greater than the impact of intellectual capital on value chain efficiency, and the impact of value chain efficiency on cash flows. In explaining the possible reasons, it can be stated that intellectual capital can affect the value chain by improving the efficiency and effectiveness of activities. Specifically, it can lead to more efficient production of goods or services, reduce costs, and improve the overall performance of the value chain; however, the relationship between intellectual capital and value chain efficiency may be influenced by the industry and context in which the company operates. In addition, intellectual capital allows companies to create greater value for customers, resulting in increased sales and revenue and, consequently, stronger cash flows. By improving transparency and reducing information asymmetry, intellectual capital disclosure enhances investor confidence and lowers the cost of equity, which ultimately boosts net cash flows. In explaining the relatively lower magnitude of the path coefficient between intellectual capital and bankruptcy risk compared to that between intellectual capital and cash flows (regardless of the direction of the relationship), it can be argued that well-developed intellectual capital enhances value chain efficiency and shareholder value, thereby increasing sales and operating income. Nevertheless, innovation derived from intellectual capital does not always guarantee a competitive advantage, as it may be influenced by factors such as industry type, economic sanctions, macroeconomic conditions, and market competition.
Discussion & Conclusion
The results further confirmed that intellectual capital significantly improves value chain efficiency. In other words, companies that effectively utilize all dimensions of intellectual capital—structural, human, physical, and financial—exhibit better overall performance across the value chain. These companies also experience higher and more stable cash flows. These findings align with the results of previous studies by Ghayouri-Moghaddam et al. (2012), D'Amato (2021), and Akpinar (2017). Moreover, companies with higher intellectual capital were found to have a lower bankruptcy risk, supporting the conclusions of Festa et al. (2021), Rasheed (2023), and Mollabashi and Sendani (2014), while differing from those of Bakshani (2014). In addition to the above results, the research findings showed that the efficiency of the company's value chain has a significant positive effect on cash flows and a negative effect on bankruptcy risk, which is consistent with the findings of Sun and Cui (2012) and Akpinar (2017). The results of the study expand the literature on the role of corporate capital dimensions, especially non-physical capital, in the synergy of the company's value chain components and its competitive advantage. On the other hand, the results of the study can be useful for decision-making and planning by company managers, analysts, and consultants in the stock market, as well as investors, shareholders, and government policymakers. In this regard, an index called the value chain efficiency rating, which covers the company's overall performance during various operational and support stages, should be considered by analysts and investors in fundamental stock analysis to enable more accurate estimation of stock intrinsic value. Given the positive and significant impact of intellectual capital on cash flows, it is recommended that managers and consultants consider the company's intangible assets and intellectual capital as factors affecting investment decisions in capital budgeting. It is also recommended that legislators specify the permitted and recommended methods for evaluating companies' intellectual capital so that a more accurate and standardized basis for their evaluation is available. In addition, because some listed companies have foreign exchange income, and given the severe exchange rate volatility in Iran and the high inflation rate, analysts and capital market participants should separate the company's actual financial performance from inflationary financial figures so that the company's intellectual capital can be evaluated more accurately.
Accounting and various aspects of finance
Gharibe Esmailikia; Mahdis Naseri; Amin Ghanbari
Abstract
In today’s world, a company’s profile is not determined solely by financial issues; rather, there is a growing need to include environmental and social perspectives. Consequently, there has been a rapidly increasing awareness of social and environmental activities, which in recent years has ...
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In today’s world, a company’s profile is not determined solely by financial issues; rather, there is a growing need to include environmental and social perspectives. Consequently, there has been a rapidly increasing awareness of social and environmental activities, which in recent years has been considered under the concept of sustainability performance. According to the contingency theory, the implementation of a sustainability approach can vary significantly depending on an organization’s unique conditions. This theory has had significant implications for management decision-making, as management decisions are influenced by the characteristics of the managers themselves. The purpose of this research is to investigate the moderating role of managers' behavioral dimensions on the relationship between contingent factors and non-financial sustainability performance. Nine research hypotheses were tested and analyzed using the information of 142 firms admitted to the Tehran Stock Exchange during the period from 2013 to 2022 (including 1,420 firm-year observations) and using regression. The results indicated a positive and significant effect of firm size on non-financial sustainability performance and a negative and significant effect of environmental complexity and uncertainty on non-financial sustainability performance. No significant relationship was documented between board independence and non-financial sustainability performance. Management optimism strengthens the relationship between firm size and non-financial sustainability performance. In addition, management myopia changes and negates the relationship between board independence and non-financial sustainability performance. However, management optimism does not have a moderating role in the relationship between environmental complexity and uncertainty and the independence of the board of directors with non-financial sustainability performance. Finally, management myopia does not moderate the relationship between firm size, environmental complexity, and uncertainty with non-financial sustainability performance. IntroductionThe business environment for companies is increasingly uncertain and unstable due to many factors, not only financial but also non-financial. The application of contingency theory to sustainability reveals several factors that may influence performance and shape sustainability-oriented practices. In the field of corporate sustainability, this theory guides companies to prioritize sustainability as a dynamic capability to identify new opportunities and threats, leverage relevant opportunities, and adapt to market dynamics. Organizational strategic outcomes and processes are influenced by the managerial characteristics of senior managers. In particular, strategic choices are driven more by behavioral factors than by mechanical optimization. This theory emphasizes that the different characteristics of senior managers affect their strategic and structural decisions, which directly impact organizational performance. Based on this, the aim of the current research is to investigate the moderating role of managers' behavioral dimensions on the relationship between contingent factors and non-financial sustainability performance.MethodologyAccording to its nature, this research is classified as applied, descriptive, and based on regression analysis. The necessary information for the research variables and hypothesis testing was gathered by referring to audited financial statements, independent audit reports, and financial database software such as Rahvard Navin and Tadbir Pardaz. The research data was then compiled in Excel, and used for statistical analysis with EViews software.In this research, the statistical population includes all the companies listed on the Tehran Stock Exchange. Considering the conditions, a total of 142 companies (equivalent to 1,420 company-years) were selected, and their data was compiled using Excel software, then summarized, classified, and refined. Based on the objectives of the research, nine hypotheses were formulated as follows:First hypothesis: Firm size has a relationship with the company's non-financial sustainability performance.Second hypothesis: Environmental complexity and uncertainty are related to the company's non-financial sustainability performance.Third hypothesis: Board independence is related to the company's non-financial sustainability performance.Fourth hypothesis: Management optimism moderates the relationship between firm size and non-financial sustainability performanceFifth hypothesis: Management optimism moderates the relationship between environmental complexity and uncertainty with non-financial sustainability performance.Sixth hypothesis: Management optimism moderates the relationship between board independence and non-financial sustainability performance.Seventh hypothesis: Management myopia moderates the relationship between firm size and non-financial sustainability performance.Eighth hypothesis: Management myopia moderates the relationship between environmental complexity and uncertainty and non-financial sustainability performance.Ninth hypothesis: Management myopia moderates the relationship between board independence and non-financial sustainability performance. To test the above hypotheses, the following regression models are used:+(1) +(2)+(3)ConclusionThe increasing pressure to meet sustainability requirements has encouraged companies to implement sustainability programs to monitor and evaluate their processes and the impact of their activities along the value chain. It appears that not only is there a difference of opinion about the definition of corporate sustainability, but there is also ambiguity regarding the implementation of corporate sustainability practices. As a result, a significant diversity in organizations and various approaches to corporate sustainability can be identified. In this context, to enhance the understanding of the implementation of sustainable practices, it is suggested to adopt contingency theory. The aim of the current research is to investigate the role of managers' behavioral dimensions on the relationship between contingent factors and non-financial sustainability performance.The results of the first hypothesis test showed that firm size has a positive and significant effect on non-financial sustainability performance. Since firm size affects the company's strategy, organizational goals, and competitive environment, non-financial performance is also influenced by these factors. Therefore, the larger the firm, the better its sustainability performance. This finding is in line with the findings of Mousanejad et al. (2021) and Yaghoubian et al. (2021).The test of the second hypothesis indicates a negative and significant impact of environmental complexity and uncertainty on non-financial sustainability performance. Non-financial sustainability performance, which encompasses diverse aspects of the company's activities such as employees, the role of shareholders, supplier contracts, internal processes, and service quality, is relevant to health indicators. The presence and increase of environmental uncertainty negatively affect the quality of these factors, meaning that environmental uncertainty and complexity reduce non-financial sustainability performance. This result is consistent with the findings of Yuliusman et al. (2023) and contradicts the findings of Yaghoubian et al. (2021).In the third hypothesis, no significant relationship between board independence and non-financial sustainability performance was documented. This finding can be explained by the fact that several factors, including the specific characteristics of companies, can affect the relationship between board independence and non-financial sustainability. Therefore, no significant relationship between these two variables was found in the companies studied.In the fourth hypothesis, the moderating role of management optimism, as one of the behavioral dimensions of managers, was investigated in the relationship between firm size and non-financial sustainability performance. The findings indicate a positive effect of management optimism on this relationship. In other words, management optimism strengthens the relationship between firm size and non-financial sustainability performance.The fifth and sixth hypotheses examined the moderating role of management optimism on the relationship between complexity, environmental uncertainty, and board independence with non-financial sustainability performance. The findings showed that management optimism does not moderate the relationship between environmental uncertainty, company complexity, and board independence with non-financial sustainability performance.The moderating role of management myopia on the relationship between contingency variables and non-financial sustainability performance was investigated in the seventh to ninth hypotheses. The findings indicate that management myopia does not moderate the relationship between firm size, complexity, and environmental uncertainty with non-financial sustainability performance. However, regarding the relationship between board independence and non-financial sustainability performance, management myopia, as a moderating variable, has changed the direction of the relationship, resulting in a negative effect of board independence on non-financial sustainability performance. In other words, management myopia leads to reduced attention to non-financial sustainability performance under conditions of greater managerial independence, thereby degrading this performance.رابطه بین عوامل اقتضایی و عملکرد پایداری غیرمالی؛ نقش
