IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v14y2021i5p218-d552940.html
   My bibliography  Save this article

The Nexus between Financial Performance and Equilibrium: Empirical Evidence on Publicly Traded Companies from the Global Financial Crisis Up to the COVID-19 Pandemic

Author

Listed:
  • Larissa Batrancea

    (Faculty of Business, Babes-Bolyai University, 400174 Cluj-Napoca, Romania)

Abstract

Financial performance and financial equilibrium are two key aspects that should be monitored by any business manager interested in passing the test of time and overcoming unpredictable events such as economic crises. The organic link between financial performance and financial equilibrium has rarely been studied in the long run for companies listed on the stock market. The present article fills this gap in the literature by examining the degree to which financial performance influenced long-term financial equilibrium using data from 34 major companies publicly traded on the New York Stock Exchange and operating around the world in a wide variety of industries and sectors. The period of analysis spread over a decade (2007Q1–2020Q3) in order to cover two major crises that have marked the dawn of the third millennium and occurred relatively close to one another: the 2008 financial meltdown and the COVID-19 pandemic crisis. By means of panel data modelling, the study showed that the short-term and long-term financial equilibria of these public companies measured by current ratio, quick ratio and debt to equity ratio were significantly impacted by different financial performance indicators. The study addresses various implications of the empirical results and lays out avenues for future research.

Suggested Citation

  • Larissa Batrancea, 2021. "The Nexus between Financial Performance and Equilibrium: Empirical Evidence on Publicly Traded Companies from the Global Financial Crisis Up to the COVID-19 Pandemic," JRFM, MDPI, vol. 14(5), pages 1-12, May.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:5:p:218-:d:552940
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/14/5/218/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/14/5/218/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ali Saleh Alarussi & Sami Mohammed Alhaderi, 2018. "Factors affecting profitability in Malaysia," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 45(3), pages 442-458, August.
    2. Anca Nichita & Larissa Batrancea & Ciprian Marcel Pop & Ioan Batrancea & Ioan Dan Morar & Ema Masca & Ana Maria Roux-Cesar & Denis Forte & Henrique Formigoni & Adilson Aderito da Silva, 2019. "We Learn Not for School but for Life: Empirical Evidence of the Impact of Tax Literacy on Tax Compliance," Eastern European Economics, Taylor & Francis Journals, vol. 57(5), pages 397-429, September.
    3. Samet Gunay & Walid Bakry & Somar Al-Mohamad, 2021. "The Australian Stock Market’s Reaction to the First Wave of the COVID-19 Pandemic and Black Summer Bushfires: A Sectoral Analysis," JRFM, MDPI, vol. 14(4), pages 1-19, April.
    4. Willem Thorbecke, 2020. "The Impact of the COVID-19 Pandemic on the U.S. Economy: Evidence from the Stock Market," JRFM, MDPI, vol. 13(10), pages 1-30, October.
    5. Michael McAleer, 2020. "Prevention Is Better Than the Cure: Risk Management of COVID-19," JRFM, MDPI, vol. 13(3), pages 1-5, March.
    6. Tanzi,Vito, 2011. "Government versus Markets," Cambridge Books, Cambridge University Press, number 9781107096530, November.
    7. Eissa A. Al‐Homaidi & Mosab I. Tabash & Najib H. Farhan & Faozi A. Almaqtari, 2019. "The determinants of liquidity of Indian listed commercial banks: A panel data approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1616521-161, January.
    8. May McMaster & Charlie Nettleton & Christeen Tom & Belanda Xu & Cheng Cao & Ping Qiao, 2020. "Risk Management: Rethinking Fashion Supply Chain Management for Multinational Corporations in Light of the COVID-19 Outbreak," JRFM, MDPI, vol. 13(8), pages 1-16, August.
    9. Eugene F. Fama, 2002. "Testing Trade-Off and Pecking Order Predictions About Dividends and Debt," The Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 1-33, March.
    10. Schaub, Nic & Schmid, Markus, 2013. "Hedge fund liquidity and performance: Evidence from the financial crisis," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 671-692.
    11. Faozi A. Almaqtari & Eissa A. Al‐Homaidi & Mosab I. Tabash & Najib H. Farhan, 2019. "The determinants of profitability of Indian commercial banks: A panel data approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(1), pages 168-185, January.
    12. Malcolm Baker & Jeffrey Wurgler, 2002. "Market Timing and Capital Structure," Journal of Finance, American Finance Association, vol. 57(1), pages 1-32, February.
    13. María Consuelo Pucheta-Martínez & Isabel Gallego-Álvarez, 2020. "Do board characteristics drive firm performance? An international perspective," Review of Managerial Science, Springer, vol. 14(6), pages 1251-1297, December.
    14. Chia-Lin Chang & Michael McAleer & Vicente Ramos, 2020. "A Charter for Sustainable Tourism after COVID-19," Sustainability, MDPI, vol. 12(9), pages 1-4, May.
    15. Larissa Batrancea, 2020. "An Econometric Approach on Performance and Financial Equilibrium during the COVID-19 Pandemic," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 801-808, December.
    16. Kaodui Li & Mohammed Musah & Yusheng Kong & Isaac Adjei Mensah & Stephen Kwadwo Antwi & Jonas Bawuah & Mary Donkor & Cephas Paa Kwasi Coffie & Agyemang Andrew Osei, 2020. "Liquidity and Firms’ Financial Performance Nexus: Panel Evidence From Non-Financial Firms Listed on the Ghana Stock Exchange," SAGE Open, , vol. 10(3), pages 21582440209, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Larissa Batrancea & Mircea Iosif Rus & Ema Speranta Masca & Ioan Dan Morar, 2021. "Fiscal Pressure as a Trigger of Financial Performance for the Energy Industry: An Empirical Investigation across a 16-Year Period," Energies, MDPI, vol. 14(13), pages 1-17, June.
    2. Emilia Herman & Kinga-Emese Zsido, 2023. "The Financial Sustainability of Retail Food SMEs Based on Financial Equilibrium and Financial Performance," Mathematics, MDPI, vol. 11(15), pages 1-26, August.
    3. Weng Hoe Lam & Weng Siew Lam & Kah Fai Liew & Pei Fun Lee, 2023. "Decision Analysis on the Financial Performance of Companies Using Integrated Entropy-Fuzzy TOPSIS Model," Mathematics, MDPI, vol. 11(2), pages 1-18, January.
    4. Luz Natalia Tobón Perilla & Elena Urquía Grande & Elisa Isabel Cano Montero, 2022. "Economic and Organizational Impact of COVID-19 on Colombia’s Tourism Sector," Sustainability, MDPI, vol. 14(20), pages 1-21, October.
    5. Qin, Meng & Su, Ai-Hsuan & Li, Ruifeng & Su, Chi-Wei, 2024. "Speculation, climate or pandemic: Who drives the Chinese herbal medicine bubbles?," China Economic Review, Elsevier, vol. 87(C).

    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. Mercè Sala‐Ríos, 2024. "What are the determinants affecting cooperatives’ profitability? Evidence from Spain," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 95(1), pages 85-111, March.
    2. Koh, SzeKee & Durand, Robert B. & Watson, Iain, 2011. "Seize the moment: Opportunism in Australian capital markets," Pacific-Basin Finance Journal, Elsevier, vol. 19(4), pages 374-389, September.
    3. Andres, Christian & Cumming, Douglas & Karabiber, Timur & Schweizer, Denis, 2014. "Do markets anticipate capital structure decisions? — Feedback effects in equity liquidity," Journal of Corporate Finance, Elsevier, vol. 27(C), pages 133-156.
    4. Drobetz, Wolfgang & Pensa, Pascal & Wöhle, Claudia B., 2004. "Kapitalstrukturtheorie in Theorie und Praxis: Ergebnisse einer Fragebogenuntersuchung," Working papers 2004/09, Faculty of Business and Economics - University of Basel.
    5. Dang, Viet Anh & Kim, Minjoo & Shin, Yongcheol, 2014. "Asymmetric adjustment toward optimal capital structure: Evidence from a crisis," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 226-242.
    6. Guriev, Sergei & Kvasov, Dmitriy, 2009. "Imperfect competition in financial markets and capital structure," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 131-146, October.
    7. Kamal Naser & Abdullah Al-Mutairi & Ahmad Al Kandari & Rana Nuseibeh, 2015. "Cogency of Capital Structure Theories to an Islamic Country: Empirical Evidence from the Kuwaiti Banks," International Journal of Economics and Financial Issues, Econjournals, vol. 5(4), pages 979-988.
    8. Ravindra N. Shukla & Vishal Vyas & Animesh Chaturvedi, 2024. "Leverage adjustment analytics: effect of Covid-19 crisis on financial adjustments of Indian firms," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 48(2), pages 513-543, June.
    9. Thi Hong Hoang & Călin Gurău & Amine Lahiani & Thuy-Luu Seran, 2018. "Do crises impact capital structure? A study of French micro-enterprises," Small Business Economics, Springer, vol. 50(1), pages 181-199, January.
    10. Rana El Bahsh & Ali Alattar & Aziz N. Yusuf, 2018. "Firm, Industry and Country Level Determinants of Capital Structure: Evidence from Jordan," International Journal of Economics and Financial Issues, Econjournals, vol. 8(2), pages 175-190.
    11. Ralf Diedrich & Stefan Dierkes & Hans-Christian Gröger, 2022. "A note on the cost of capital with fixed payout ratios," Review of Quantitative Finance and Accounting, Springer, vol. 59(4), pages 1559-1575, November.
    12. Rafael Garcia & António Cerqueira & Elísio Brandão, 2016. "Determinants of capital structure of firms: an analysis on the Euro Zone and the U.K," FEP Working Papers 584, Universidade do Porto, Faculdade de Economia do Porto.
    13. Norman Schuerhoff, 2004. "Capital Gains Taxes, Irreversible Investment, and Capital Structure," 2004 Meeting Papers 688, Society for Economic Dynamics.
    14. DeAngelo, Harry & DeAngelo, Linda & Stulz, René M., 2010. "Seasoned equity offerings, market timing, and the corporate lifecycle," Journal of Financial Economics, Elsevier, vol. 95(3), pages 275-295, March.
    15. Sjur Westgaard & Amund Eidet & Stein Frydenberg & Thor Christian Grosås, 2008. "Investigating the Capital Structure of UK Real Estate Companies," Journal of Property Research, Taylor & Francis Journals, vol. 25(1), pages 61-87, August.
    16. Walter I. Boudry & Jarl G. Kallberg & Crocker H. Liu, 2010. "An Analysis of REIT Security Issuance Decisions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(1), pages 91-120, March.
    17. Davidson Heath & Giorgo Sertsios, 2022. "Profitability and Financial Leverage: Evidence from a Quasi-Natural Experiment," Management Science, INFORMS, vol. 68(11), pages 8386-8410, November.
    18. Christian M. Hafner, 2020. "The Spread of the Covid-19 Pandemic in Time and Space," IJERPH, MDPI, vol. 17(11), pages 1-13, May.
    19. Lin, Shannon & Tong, Naqiong & Tucker, Alan L., 2014. "Corporate tax aggression and debt," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 227-241.
    20. William R. Pratt & Gustavo A. Barboza & Matthew Brigida, 2023. "Leverage and firm value," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 52(2), July.

    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:gam:jjrfmx:v:14:y:2021:i:5:p:218-:d:552940. 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.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.