IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2017-03-17.html
   My bibliography  Save this article

The Use of Artificial Neural Networks for Quantifying the Relative Importance of the Firms' Performance Determinants

Author

Listed:
  • Gholamhossein Mahdavi

    (Shiraz University, Iran)

  • Mohammad Sadeghzadeh Maharluie

    (Shiraz University, Iran)

  • Ahmad Shokrolahi

    (Shiraz University, Iran)

Abstract

Performance is the outcome of all plans and decisions of a company. It shows the ways companies are governed. Consequently, determining the relative importance (RI) of factors influencing the performance is important. Therefore, in this study, seven independent variables were determined based on the literature. Then, the significant variables were chosen using the Pearson's correlation test. Finally, an artificial neural network was designed to investigate the RI of the determinants. In total, 1340 company-year data were collected from Tehran stock exchange from 2001 to 2010. The research results revealed that institutional ownership concentration is the most important factor which is followed by state ownership, and managerial stock ownership. Debt policy and firm size are ranked in lower position.

Suggested Citation

  • Gholamhossein Mahdavi & Mohammad Sadeghzadeh Maharluie & Ahmad Shokrolahi, 2017. "The Use of Artificial Neural Networks for Quantifying the Relative Importance of the Firms' Performance Determinants," International Journal of Economics and Financial Issues, Econjournals, vol. 7(3), pages 119-127.
    • Handle: RePEc:eco:journ1:2017-03-17
    as

    Download full text from publisher

    File URL: http://www.econjournals.com/index.php/ijefi/article/download/4354/pdf
    Download Restriction: no
    File URL: http://www.econjournals.com/index.php/ijefi/article/view/4354/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bhattacharya, Prasad S. & Graham, Michael A., 2009. "On institutional ownership and firm performance: A disaggregated view," Journal of Multinational Financial Management, Elsevier, vol. 19(5), pages 370-394, December.
    2. Drakos, A.A. & Bekiris, F.V., 2010. "Corporate performance, managerial ownership and endogeneity: A simultaneous equations analysis for the Athens stock exchange," Research in International Business and Finance, Elsevier, vol. 24(1), pages 24-38, January.
    3. Earnhart, Dietrich & Lizal, Lubomir, 2006. "Effects of ownership and financial performance on corporate environmental performance," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 111-129, March.
    4. Huang, Guihai & Song, Frank M., 2006. "The determinants of capital structure: Evidence from China," China Economic Review, Elsevier, vol. 17(1), pages 14-36.
    5. Julan Du & Yi Dai, 2005. "Ultimate Corporate Ownership Structures and Capital Structures: evidence from East Asian economies," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(1), pages 60-71, January.
    6. A. A. Drakos & F. V. Bekiris, 2010. "Endogeneity and the relationship between board structure and firm performance: a simultaneous equation analysis for the Athens Stock Exchange," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(6), pages 387-401.
    7. Jayesh Kumar, 2004. "Does Ownership Structure Influence Firm Value? Evidence from India," Finance 0406008, University Library of Munich, Germany.
    8. de Jong, Abe & Kabir, Rezaul & Nguyen, Thuy Thu, 2008. "Capital structure around the world: The roles of firm- and country-specific determinants," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1954-1969, September.
    9. Velury, Uma & Jenkins, David S., 2006. "Institutional ownership and the quality of earnings," Journal of Business Research, Elsevier, vol. 59(9), pages 1043-1051, September.
    10. Chung, Richard & Firth, Michael & Kim, Jeong-Bon, 2005. "Earnings management, surplus free cash flow, and external monitoring," Journal of Business Research, Elsevier, vol. 58(6), pages 766-776, June.
    11. Kannan Ramaswamy, 2001. "Organizational ownership, competitive intensity, and firm performance: an empirical study of the Indian manufacturing sector," Strategic Management Journal, Wiley Blackwell, vol. 22(10), pages 989-998, October.
    12. Bejou, David & Wray, Barry & Ingram, Thomas N., 1996. "Determinants of relationship quality: An artificial neural network analysis," Journal of Business Research, Elsevier, vol. 36(2), pages 137-143, June.
    13. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    14. Rubin, Amir, 2007. "Ownership level, ownership concentration and liquidity," Journal of Financial Markets, Elsevier, vol. 10(3), pages 219-248, August.
    15. Laurence Booth & Varouj Aivazian & Asli Demirguc‐Kunt & Vojislav Maksimovic, 2001. "Capital Structures in Developing Countries," Journal of Finance, American Finance Association, vol. 56(1), pages 87-130, February.
    16. Hu, Michael Y. & Tsoukalas, Christos, 2003. "Explaining consumer choice through neural networks: The stacked generalization approach," European Journal of Operational Research, Elsevier, vol. 146(3), pages 650-660, May.
    17. Boone, Audra L. & Casares Field, Laura & Karpoff, Jonathan M. & Raheja, Charu G., 2007. "The determinants of corporate board size and composition: An empirical analysis," Journal of Financial Economics, Elsevier, vol. 85(1), pages 66-101, July.
    18. Joshua Abor, 2007. "Debt policy and performance of SMEs: Evidence from Ghanaian and South African firms," Journal of Risk Finance, Emerald Group Publishing, vol. 8(4), pages 364-379, August.
    19. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    20. Panayotis Kapopoulos & Sophia Lazaretou, 2007. "Corporate Ownership Structure and Firm Performance: evidence from Greek firms," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 144-158, March.
    21. Rajan, Raghuram G & Zingales, Luigi, 1995. "What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
    22. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    23. Myers, Stewart C, 1984. "The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
    24. Chen, Kevin C. W. & Chen, Zhihong & Wei, K. C. John, 2011. "Agency Costs of Free Cash Flow and the Effect of Shareholder Rights on the Implied Cost of Equity Capital," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(1), pages 171-207, February.
    25. Frank, Murray Z. & Goyal, Vidhan K., 2003. "Testing the pecking order theory of capital structure," Journal of Financial Economics, Elsevier, vol. 67(2), pages 217-248, February.
    26. Namazi, Mohammad & Shokrolahi, Ahmad & Sadeghzadeh Maharluie, Mohammad, 2016. "Detecting and ranking cash flow risk factors via artificial neural networks technique," Journal of Business Research, Elsevier, vol. 69(5), pages 1801-1806.
    27. D'Mello, Ranjan & Miranda, Mercedes, 2010. "Long-term debt and overinvestment agency problem," Journal of Banking & Finance, Elsevier, vol. 34(2), pages 324-335, February.
    28. Petro Lisowsky & Leslie Robinson & Andrew Schmidt, 2013. "Do Publicly Disclosed Tax Reserves Tell Us About Privately Disclosed Tax Shelter Activity?," Journal of Accounting Research, Wiley Blackwell, vol. 51(3), pages 583-629, June.
    29. Céspedes, Jacelly & González, Maximiliano & Molina, Carlos A., 2010. "Ownership and capital structure in Latin America," Journal of Business Research, Elsevier, vol. 63(3), pages 248-254, March.
    30. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
    31. Cornett, Marcia Millon & Marcus, Alan J. & Saunders, Anthony & Tehranian, Hassan, 2007. "The impact of institutional ownership on corporate operating performance," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1771-1794, June.
    32. Elyasiani, Elyas & Jia, Jingyi Jane, 2008. "Institutional ownership stability and BHC performance," Journal of Banking & Finance, Elsevier, vol. 32(9), pages 1767-1781, September.
    33. Xu, Xiaonian & Wang, Yan, 1999. "Ownership structure and corporate governance in Chinese stock companies," China Economic Review, Elsevier, vol. 10(1), pages 75-98.
    34. Michael A. Salinger, 1984. "Tobin's q, Unionization, and the Concentration-Profits Relationship," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 159-170, Summer.
    35. Salla Pöyry & Benjamin Maury, 2010. "Influential ownership and capital structure," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 311-324.
    36. Fama, Eugene F & French, Kenneth R, 1995. "Size and Book-to-Market Factors in Earnings and Returns," Journal of Finance, American Finance Association, vol. 50(1), pages 131-155, March.
    37. Henry, Darren, 2010. "Agency costs, ownership structure and corporate governance compliance: A private contracting perspective," Pacific-Basin Finance Journal, Elsevier, vol. 18(1), pages 24-46, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Namazi, Mohammad & Shokrolahi, Ahmad & Sadeghzadeh Maharluie, Mohammad, 2016. "Detecting and ranking cash flow risk factors via artificial neural networks technique," Journal of Business Research, Elsevier, vol. 69(5), pages 1801-1806.
    2. Mário Santos & António Moreira & Elisabete Vieira, 2014. "Ownership concentration, contestability, family firms, and capital structure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 1063-1107, November.
    3. Anwar, Sajid & Sun, Sizhong, 2015. "Can the presence of foreign investment affect the capital structure of domestic firms?," Journal of Corporate Finance, Elsevier, vol. 30(C), pages 32-43.
    4. Zhang, Dongyang & Liu, Deqiang, 2017. "Determinants of the capital structure of Chinese non-listed enterprises: Is TFP efficient?," Economic Systems, Elsevier, vol. 41(2), pages 179-202.
    5. Mai, Nhat Chi, 2012. "Market timing, taxes and capital structure: evidence from Vietnam," OSF Preprints t3mvs, Center for Open Science.
    6. Vo, Xuan Vinh, 2017. "Determinants of capital structure in emerging markets: Evidence from Vietnam," Research in International Business and Finance, Elsevier, vol. 40(C), pages 105-113.
    7. Firano, Zakaria & Filali adib, Fatine, 2022. "Optimal Capital structure and financial stability," MPRA Paper 115790, University Library of Munich, Germany, revised 2022.
    8. Mohamed, Hisham Hanifa & Masih, Mansur & Bacha, Obiyathulla I., 2015. "Why do issuers issue Sukuk or conventional bond? Evidence from Malaysian listed firms using partial adjustment models," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 233-252.
    9. Feld, Lars P. & Heckemeyer, Jost H. & Overesch, Michael, 2013. "Capital structure choice and company taxation: A meta-study," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2850-2866.
    10. Miguel Acedo-Ramírez & Juan Ayala-Calvo & José Rodríguez-Osés, 2013. "Capital structure of small companies in the Spanish footwear sector: relevant factors," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(2), pages 155-173, June.
    11. İbrahim Yarba & Z. Nuray Güner, 2020. "Leverage dynamics: Do financial development and government leverage matter? Evidence from a major developing economy," Empirical Economics, Springer, vol. 59(5), pages 2473-2507, November.
    12. Aleksandra Stoiljković & Slavica Tomić & Bojan Leković & Milenko Matić, 2022. "Determinants of Capital Structure: Empirical Evidence of Manufacturing Companies in the Republic of Serbia," Sustainability, MDPI, vol. 15(1), pages 1-19, December.
    13. A.O. Olakunle & P.L. Jones, 2014. "Assessing the Impact of Size on the Capital Structure Choice for Listed Nigeria Firms," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 4(7), pages 184-202, July.
    14. AVIRAL Kumar Tiwari & RAVEESH Krishnankutty, 2015. "Determinants Of Capital Structure: A Quantile Regression Analysis," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 10(1), pages 16-34, April.
    15. Quratulain Zafar & Winai Wongsurawat & David Camino, 2019. "The determinants of leverage decisions: Evidence from Asian emerging markets," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1598836-159, January.
    16. repec:idn:jimfjn:v:1:y:2016:i:2e:p:1-34 is not listed on IDEAS
    17. Aamer Shahzad & Muhammad Azeem & Mian Sajid Nazir & Xuan Vinh Vo & Nguyen T. M. Linh, 2021. "The determinants of capital structure: Evidence from SAARC countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6471-6487, October.
    18. Yildirim, Ramazan & Masih, Mansur & Bacha, Obiyathulla Ismath, 2018. "Determinants of capital structure: evidence from Shari'ah compliant and non-compliant firms," Pacific-Basin Finance Journal, Elsevier, vol. 51(C), pages 198-219.
    19. Alves, Paulo & Couto, Eduardo Barbosa & Francisco, Paulo Morais, 2015. "Board of directors’ composition and capital structure," Research in International Business and Finance, Elsevier, vol. 35(C), pages 1-32.
    20. Margaritis, Dimitris & Psillaki, Maria, 2010. "Capital structure, equity ownership and firm performance," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 621-632, March.
    21. Berk YILDIZ, 2024. "Validity of Capital Structure Theories in the Shipping Industry: An Application on U.S. Equity Markets," Sosyoekonomi Journal, Sosyoekonomi Society, issue 32(60).

    More about this item

    Keywords

    Performance; Artificial Neural Networks; Tehran Stock Exchange;
    All these keywords.

    JEL classification:

    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2017-03-17. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.