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Indicators of Successful Companies

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  • Johnson, Robert
  • Soenen, Luc

Abstract

Using monthly Compustat data for 478 companies covering the period 1982-1998, we investigate which factors discriminate between financially successful and less successful companies. Financial success is measured using three different methods, i.e., the Sharpe ratio, Jensen's alpha, and EVA. We consider a total of 10 different company specific characteristics as potential indicators of superior performance. A binary logit model is applied to quantify the relationship between the individual firm characteristics and the probability that a particular measure of success will be greater or lower than the average for all firms considered. We also calculate the percentage correct prediction by the model for each measure of success. We find that especially large profitable firms with efficient working capital management and a certain degree of uniqueness regarding their business are the most successful companies.

Suggested Citation

  • Johnson, Robert & Soenen, Luc, 2003. "Indicators of Successful Companies," European Management Journal, Elsevier, vol. 21(3), pages 364-369, June.
    • Handle: RePEc:eee:eurman:v:21:y:2003:i:3:p:364-369
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    Citations

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    Cited by:

    1. Yuriy Ivanovich Sigidov & Marina Aleksandrovna Korovina & Aleksander Ivanovich Trubilin & Viktor Vilenovich Govdya & Nadezhda Konstantinovna Vasilieva, 2016. "Creation of Provision for Doubtful Debts," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1542-1549.
    2. Syed Ali Raza, Mohd Zaini Abd Karim, 2016. "Do Liquidity and Financial Leverage Constrain the Impact of Firm Size and Dividend Payouts on Share Price in Emerging Economy," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(2), pages 71-86, October.
    3. Ani L. Katchova & Sierra J. Enlow, 2013. "Financial performance of publicly‐traded agribusinesses," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 73(1), pages 58-73, May.
    4. Alexis Kythreotis & Bagher Asgarnezhad Nouri & Milad Soltani, 2018. "Determinants of Capital Structure and Speed of Adjustment: Evidence from Iran and Australia," International Journal of Business Administration, International Journal of Business Administration, Sciedu Press, vol. 9(1), pages 88-113, January.
    5. Abu Jalal & Shahriar Khaksari, 2020. "Cash cycle: A cross‐country analysis," Financial Management, Financial Management Association International, vol. 49(3), pages 635-671, September.
    6. Andreeva, T. & Garanina, T., 2015. "Intellectual capital elements and organizational performance of Russian manufacturing companies," Working Papers 6413, Graduate School of Management, St. Petersburg State University.
    7. Reddy, K. Srinivasa & Nangia, Vinay Kumar & Agrawal, Rajat, 2012. "Corporate mergers and financial performance: A new assessment of Indian cases," MPRA Paper 60425, University Library of Munich, Germany, revised 2013.
    8. Alaa Adden A. Abuhommous, 2017. "Net Working Capital and Firm Growth," International Review of Management and Marketing, Econjournals, vol. 7(4), pages 131-137.
    9. Halkos, George E. & Tzeremes, Nickolaos G., 2012. "Analyzing the Greek renewable energy sector: A Data Envelopment Analysis approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(5), pages 2884-2893.
    10. Joseph Kwadwo Tuffour & Kenneth Ofori-Boateng & Williams Ohemen, 2020. "Efficiency of Listed Banks Operations and Stock Price Movements," International Journal of Economics and Financial Issues, Econjournals, vol. 10(1), pages 219-227.
    11. Manikas, Andrew S. & Patel, Pankaj C., 2016. "Managing sales surprise: The role of operational slack and volume flexibility," International Journal of Production Economics, Elsevier, vol. 179(C), pages 101-116.
    12. Ashwin Madhou & Imad Moosa & Vikash Ramiah, 2015. "Working Capital as a Determinant of Corporate Profitability," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 18(04), pages 1-17, December.
    13. George Tsourvakas & Kyriakos Riskos, 2018. "Emergent Success Factors for Entrepreneurial E-media Companies," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 4(2), pages 101-120, July.
    14. Ilias Makris & Vasileios Giannopoulos & Efi Cheila, 2022. "Associating Company-Specific Characteristics with Ownership Structure and Performance: An Analysis of Publicly Listed Firms from Selected Countries in the Eurozone during the 2008 Financial Crisis and," Businesses, MDPI, vol. 2(4), pages 1-13, October.
    15. Marina A. Oskolkova & Petr A. Parshakov, 2013. "Company intangibles: creation vs absorption," HSE Working papers WP BRP 25/FE/2013, National Research University Higher School of Economics.
    16. Parshakov, Petr & Zavertiaeva, Marina, 2017. "Companies intangibles: Unique versus generic," International Review of Economics & Finance, Elsevier, vol. 49(C), pages 266-275.
    17. Shaista Wasiuzzaman & Ali Uyar & Cemil Kuzey & Abdullah S. Karaman, 2022. "Corporate social responsibility: Is it a matter of slack financial resources or strategy or both?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2444-2466, September.
    18. Pascual-Ezama, David & Paredes, Mercedes Rodríguez & Sanchez-Martín, María-del-Pilar & de Liaño, Beatriz Gil-Gómez, 2018. "Shorter and easier is more useful: A longitudinal analysis of how financial report enforcement affects individual investors," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 74(C), pages 29-37.
    19. Marina A. Zavertiaeva, 2015. "Portfolio Forming Decisions: The Role of Intangibles," HSE Working papers WP BRP 44/FE/2015, National Research University Higher School of Economics.

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