Effects of Innovations and Moderating Role of Corporate Social Responsibility on the Financial Performance of the Firms Listed on the Tehran Stock Exchange in Different Industries

Document Type : Research Paper

Authors

1 Prof. of Accounting, Faculty of Social Sciences, Economics and Management Shiraz University, Shiraz, Iran

2 MSc. of Accounting, Faculty of Social Sciences, Economics and Management Shiraz University, Shiraz, Iran

Abstract

Objective: Innovation would enable companies to respond to competition and environmental changes, and by obtaining new capabilities, they would access to superior financial performance. The main objective of this research is to determine the impact of innovation and the moderating role of social responsibility on relationship between innovation and financial performance of companies in various industries.
Methods: The population of the study consisted of 184 active firms (1840 firm –year) listed in the Tehran Stock Exchange from 2007 to 2016. In order to investigate the effect of variables, the structural equation method and for analysis of patterns, a partial least squares (PLS-SEM) approach were used.
Results: The results of the first hypothesis test show that in the Tehran Stock Exchange, innovation in automotive industry, tools and machinery, and pharmaceutical, chemical, and plastic industries posit a greater impact on financial performance than other industries. Innovative organizations have a superior financial performance. The results of the second hypothesis test indicate that direct and positive impact of social responsibility on financial performance of the company is significant. Social responsibility in the pharmaceutical, chemical, rubber and tile industries, cement, lime, plaster, and other industries show a greater impact on the financial performance of companies. As social responsibilities increase, companies' performance will also improve.
Conclusion: The results of the third hypothesis test indicated that there is a significant relationship between innovation and financial performance of the company in all industries when social responsibility is used as a moderating variable. But its impact on the automotive industry, machine parts, pharmaceuticals, chemicals and plastics, as well as the tile industry, cement, lime and plaster is more than other industries. In this case, the power of the model increases in all industries.

Keywords

References

 
References
Abrahami, K., Bahrami Nasab, A. & Mamshli, R. (2016). Impact of financial crisis on profit quality. Journal of Accounting and Auditing Review, 23 (4), 415-434. (in Persian)
Amara, N., Pablo, D., Landry, R. & Doloreux, D. (2016). Impacts of obstacles on innovation patterns in KIBS firms. Journal of Business Research, 69 (10), 4065–4073.
Arab Salehi, M., Sadeghi. GH. & Moin al-Din. M. (2013). The relationship of social responsibility with the financial performance of companies admitted to the Tehran Stock Exchange. Empirical Accounting Research, 3(9), 1-20. (in Persian)
Arabmazar Yazdi, M., Naseri, A., Nikouei Zadeh, M. & Moradi, A. (2017). Investigating the impact of accounting information system flexibility on company performance with dynamic capabilities approach. Journal of Accounting and Auditing Review, 24 (2), 221-242. (in Persian) 
Asadi, GH. And Rezaei, M. (2011). Impact of implementation of balanced assessment on firm performance. Accounting Research, 3(10), 71-56. (in Persian)
Avishek, B. & David, J. (2017). Corporate social responsibility and capital allocation efficiency. Journal of Corporate Finance, 43(3), 354-377.
Azizul Islam, M. (2009). Social and Environmental Reporting Practices Organizations Operating in, or Sourcing Products from, a Developing Country: Evidence from Bangladesh. University of Dhaka.
Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173-1182.
Bowen, H. R. (1953). Social Responsibilities of Businessman. New York: Harper.
Bulgurcu, B. (2012). Application of TOPSIS technique for financial performance evaluation of technology firms in Istanbul stock exchange market. Procedia- Social and Behavioral Sciences, 62(1), 1033-1040.
Burns, T. & Stalker, G. M. (1961). The Management of Innovation. London Travistock.
Butler, J. E. (1988). Theories of technological innovation as useful tools for corporate Strastegy. Strategic Management Journal, 9 (1), 15-29.
Chenhall, R.H. (2005). Integrative strategic performance measurement systems, strategic alignment of manufacturing, learning and strategic outcomes: An exploratory study. Accounting, Organization and Society, 30(5), 395-422.
Damanpour, F. (1987). The adoption of technological administered and ancillary innovation: impact of organizational factors. Journal of Management, 13(4), 675-688.
Damanpour, F., & Evan, W. M. (1984). Organizational innovation and per formance: The problem of organizational lag. Administrative Science Quarterly, 29 (3), 392–409.
Daniel, F., Lohrke, F., Fornaciari, C., & Turner, A., Jr. (2004). Slack resources and firm performance: A meta-analysis. Journal of Business Research, 57 (6), 565–574.
David, F., Leonardo, F. Herbert, K., & Vinicius, A. (2014). Eco-innovation in the Brazilian sugar-ethanol industry: A case study. Brazilian Journal of Science and Technology, 4 (36), 2188 - 2196.
De-Andrés, J., Landajo, M., & Lorca, P. (2009). Flexible quantile-based modeling of bivariate financial relationships: The case of ROA ratio. Expert Systems with Applications, 36 (5), 8955-8966.
DeCarolis, D. M., Deeds, D. L. (1999). The impact of stocks and flows of organizational knowledge on firms’performance: an empirical investigation of the biotechnology industry. Strategic Management Journal, 20 (10), 953–968.
Dekoulou, P. & Trivellas, P. (2017). Organizational structure, innovation performance and customer relationship value in the Greek advertising and media industry. Journal of Business & Industrial Marketing, 32 (3), 385-397.
Dey, A. (2008). Corporate governance and agency conflict 's. Journal of Accounting Research, 46 (5), 1143-1181.
Edirisinghe, N.C.P., Zhang, X. (2008). Portfolio selection under DEA-based relative financial strength indicators: Case of US industries. Journal of the Operational Research Society, 59 (6), 842-856.
Fallah, A. & Karami, S. (2017). Ivestigating the relationship between social responsibility and financial and non-financial performance of the company. Case Study: Industrial Companies of Golestan Province. The 5th International Accounting and Management Conference and the 2nd Conference on Entrepreneurship and Innovations. (in Persian)
Fanian, M. (2017). Investigating the Relationship between Economic and Social Responsibility and Financial Performance with Emphasis on the Role of Innovation in Food Producers in Isfahan. Master's Thesis. Azad University of Najaf Abad.
Gitman, L. J. (1974). Estimating corporate liquidity requirements: A Simplified approach. The Financial Reviews, 9 (1), 79-88.
González-Rodrígueza, M. R., Jiménez-Caballero, J.L., Martín-Samper, R. C., Köseoglu, M.A, & Fevzi Okumus. F. (2018). Revisiting the link between business strategy and performance: Evidence from hotels. International Journal of Hospitality Management, 72 (2), 21–31.
Hajiha, Z., & Kharatzadeh, M. (2014). Investigating the relationship between the application of management accounting innovations and financial performance indicators in accepted companies in Tehran Stock Exchange. Journal of Accounting and Auditing Review, 4(14), 105-123. (in Persian)
Hekkert, M. P., Suurs, R. A. A., Negro, S. O., Kuhlmann, S., & Smits, R. E. H. M. (2007). Functions of innovation systems: A new approach for analyzing technological change. Technological Forecasting and Social Change, 74 (4), 413-432.
Hulland, J. (1999). Use of partical least squares (PLS) in strategic management research: A review of four recent studies. Strategic Management Journal, 20(2), 195-204.
Hult, G. T. M., Ketchen, D. J. Jr., & Slater, S.F. (2005). Market orientation and performance: An integration of disparate approaches. Strategic Management Journal, 26 (12), 1173-1181.
Jensen, M., & Meckling, W. (1976). Theory of the firm: Managerial behavior, agency costs, and capital structure. Journal of Financial Economics, 3 (4), 305–360.
Johnson, B. R., Connolly, E., Carter, T. S. (2010). Corporate‎ social responsibility the role of fortune 100 companies in domestic and international natural disasters. Journal of Corporate Social Responsibility and Environmental Management, 18 (6), 352-369.
Johnson, H. T., & Kaplan, R.S. (1987). Relevance Lost. Accounting Horizons (December), 110-116.
Jurkus, A. F., Park, J. C., & Woodard, L. S. (2011). Women in top management and agency costs. Journal of Business Research, 64 (2), 180–186.
Kunz, J. (2015). Objectivity and subjectivity in performance evaluation and autonomous motivation: an exploratory study. Management Accounting Research, 27 (22), 27-46.
Li, D., Cao, C., Zhang, L., Chen, X., Ren, Sh. & Zhao, Y. (2017). Effects of corporate environmental responsibility on financial performance: The moderating role of government regulation and organizational slack. Journal of Cleaner Production 166 (8), 1323 - 1334.
Mallin, B.C., Farag, H., & Ow-Yonga, K. (2014). Corporate social responsibility and financial performance in Islamic banks. Journal of Economic Behavior & Organization, 103 (3), 21–38.
Melyk, L. Z. & Birita, A. (1974). Comprehensive liquidity index as an measures of corporate liquidity. Scientific and Behavioral Foundations of Decision Sciences.
 Mercedes, R. (2016). Social responsibility and financial performance: The role of good corporate governance. BRQ Business Research Quarterly, 19 (2), 137-151.
Mishra, D. R., Sodok, E. Gh., Omran, G., & Chuk, C. (2011). Does corporate social responsibility affect the cost of capital? Journal of Banking & Finance, 35 (9), 2388-2406.
Namazi, M. (1985). Theoretical developments of principal-agent employment contract in accounting: The state of the art. Journal of Accounting Literature (Spring), 113-163.
Namazi, M., & Gholami, R. (2016). A comprehensive model of corporate ranking using accounting information, balanced scorecard and Paperica Technique. Journal of Accounting Knowledge, 7 (27), 7-33. (in Persian)
Namazi, M., & Namazi, N.R. (2016). Conceptual analysis of moderator and mediator variables in business research. Procedia Economics and Finance, (36), 540-554.
Namazi, M., & Namazi, N.R. (2016). Ranking of companies based on performance measurement measures using multi-index topisis technique and comparison of evaluation criteria (Evidence from Tehran Stock Exchange). Financial Accounting Research, 28 (2): 39-64. (in Persian)
Navarro, J. G. C., Reverte, C., Melero, E. G., & Wensley, A. K. P. (2016). Linking social and economic responsibilities with financial performance: The role of innovation. European Management Journal, 34(5), 530-539.
Nekhili, M., Nagatib, H., & Tawhid, Ch. (2017). Claudia rebolledod corporate social responsibility disclosure and market value: Family versus nonfamily firms. Journal of Business Research, 77 (C), 41–52.
Olugu, E. U. & Wong Kuan. Y. (2012). An expert fuzzy rule-based system for closed-loop supply chain performance assessment in the automotive industry. Expert Systems with Applications, 39(1), 375-384.
Oregan, N., Ghobadian, A., & Martin, S. (2006). Fast tracking innovation in Manufacturing SEM. Innovation, 26(2), 251-261.
Peter, T. (2017). Configurations of strategic R&D decisions and financial performance in small-sized and medium-sized firms. Journal of Business Research, 74(5), 55–65.
Quynhthu, N. (2011). The relationship between corporate culture and use of management accounting innovation in Vietnamese companies: A study of Techcom Bank, Graduation Project.
Ramanathan, R., Ramanathan, U., Bentley, Y. (2017). The debate on ßexibility of environmental regulations, innovation capabilities and Þnancial performance -A novel use of DEA, Omega, 75(5), 131-138.
Rodil, X., Vence, M., & Sánchez, M. C. (2016). The relationship between innovation and export behaviour: The case of Galician firms. Technological Forecasting & Social Change, 113 (3), 248–265.
Rogers, E. M., & Shoemaker, F. F. (1971). Communication of Innovations: A Cross-Cultural Approach, 2nd ed., The Free Press, New York, NY.
Sanford, B. (2007). Innovation, success and failure in public management research: Some methodological reflections. Public Management Review, 3(1), 3-17.
Scott, S.G., Bruce, R.A. (1994). Determinants of innovative behavior: A path model of individual innovation in the workplace. Academy of Management Journal, 37 (3), 580–607.
Seleshi, S., & Birnberg, G. J. (2010). Extent and scope of diffusion and adoption of process innovations in management accounting systems International. Journal of Accounting and Information Management, 18 (2), 118-139.
Seng, P. M. (1990). The fifth discipline: The art and practice of the learning organization. New York, NY: Currency Doubleday.
Shulman, J. & Cox, R. (1985). An integrative approach to working capital management. Journal Cash Management, 5 (6), 64-84.
Stephanus, R. W., Michelle, D. W., & Toto, R. (2014). CSR and financial performance analysis: Evidence from top ASEAN listed companies. Procedia Social and Behavioral Sciences, 164 (2), 493-500.
Thornhill, S. (2006). Knowledge, innovation & firm performance in high- and low-technology regimes. Journal of Business Venturing, 21(5), 687– 703.
Van de Velde, E., Vermeir, W., & Corten, F. (2005). Corporate social responsibility and financial performance. Finance and Accounting. 5 (3), 129-138.
Wang, Zh. & Sarkis, J. (2017). Corporate social responsibility governance, outcomes, and financial performance. Journal of Cleaner Production, 162 (3), 1607-1616.
Wang. X., & Mayukh, D. (2017). Building innovation capability: The role of top management innovativeness and relative-exploration orientation. Journal of Business Research, 76 (6), 127–135.
Williams, S. M. (1999).Voluntary environmental and social accounting disclosure practices in the Asia-pacific region: An international empirical test of political economy theory. International Journal of Accounting, 34(2), 209-238.
Yalcin, N., Bayrakderaglu, A., & Kahraman, C. (2012). Application of fuzzy multi-criteria decision making methods for financial performance evaluation of Turkish manufacturing industries. Expert Systems with Applications, 39 (1), 350-364.
Yinyoung, R., Manisha, S., & Yoon, K. (2018). CSR and financia performance: The role of CSR awareness in the restaurant industry. International Journal of Hospitality Management, 57, 30-39.
Zhang, Y. F., Namazi, M., Che Ruhana Isa, Ch. R. (2017). Investigating the Empirical Effect of ABC Stages on the Performance of Companies. Iranian Journal of Management Studies (IJMS, 10 (1), 175-205.
 
 
 
 
 
 
 
 
Accounting and Auditing Review
Volume 25, Issue 2
2018
Pages 289-310

Files

Share

How to cite

Statistics