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Modelling the Link Between Management Practices and Financial Performance. Evidence from Small Construction Companies

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  • Johan Maes
  • Luc Sels
  • Filip Roodhooft

Abstract

This paper develops a structural model to investigate the direct and indirect effects of owner–manager and company characteristics and selected management practices on the financial performance of a sample of 218 small Belgian construction companies. The results show that the owner–manager and company characteristics (experience, education, financial knowledge, knowledge of cost accounting, company size and age) have no direct significant impact on financial performance. However, several significant paths have been found between the owner–manager and company characteristics and management practices. As far as the direct effects of the management practices are concerned we observe several significant paths from the management practices to financial performance. Our findings indicate that a model approach by including owner–manager and company characteristics and management practices in an intertwined way is necessary when exploring their effects on small business financial performance. Copyright Springer 2005

Suggested Citation

  • Johan Maes & Luc Sels & Filip Roodhooft, 2005. "Modelling the Link Between Management Practices and Financial Performance. Evidence from Small Construction Companies," Small Business Economics, Springer, vol. 25(1), pages 17-34, August.
    • Handle: RePEc:kap:sbusec:v:25:y:2005:i:1:p:17-34
    DOI: 10.1007/s11187-005-4255-y
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    References listed on IDEAS

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    Cited by:

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    2. Rodríguez-Lesmes, Paul & Gutierrez, Luis H. & Urueña-Mejia, Juan Carlos & Ortiz, Andres & Medina Rojas, Ivan & Romero, Mauricio, 2023. "The role of local promoters in helping microentrepreneurs engage in digital business training. The case of Expertienda," Documentos de Trabajo 20902, Universidad del Rosario.
    3. Maxwell Sandada & Lorraine Mangwandi, 2015. "An Assessment of the Influence of Selected on the Performance of Small to Medium Sized Family Owned Businesses in the Zimbabwe Retail Sector," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 11(5), pages 5-16, October.
    4. Riccardo Calcagno & Paolo Finaldi Russo & Ludovica Galotto & Anita Quas, 2024. "Financial literacy of micro-entrepreneurs and access to credit," Questioni di Economia e Finanza (Occasional Papers) 853, Bank of Italy, Economic Research and International Relations Area.
    5. Elena Ahmadi & Gloria Macassa & Johan Larsson, 2021. "Managers’ work and behaviour patterns in profitable growth SMEs," Small Business Economics, Springer, vol. 57(2), pages 849-863, August.
    6. Antonio Molina-García & Julio Diéguez-Soto & M. Teresa Galache-Laza & Marta Campos-Valenzuela, 2023. "Financial literacy in SMEs: a bibliometric analysis and a systematic literature review of an emerging research field," Review of Managerial Science, Springer, vol. 17(3), pages 787-826, April.
    7. Muhammad Sadiq & Amna Alamgir & Syed Wajahat Ali, 2020. "The Impacts of Total Quality Management, Human Resource Management, and Agility in Business on Firms Financial Performance: Moderating Role of Emerging Business Competition," iRASD Journal of Management, International Research Alliance for Sustainable Development (iRASD), vol. 2(1), pages 09-21, June.
    8. Juan Carlos Urueña-Mejía & Luis H. Gutierrez & Paul Rodríguez-Lesmes, 2023. "Financial inclusion and business practices of microbusiness in Colombia," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(2), pages 465-494, June.
    9. Horta, I.M. & Camanho, A.S. & Moreira da Costa, J., 2012. "Performance assessment of construction companies: A study of factors promoting financial soundness and innovation in the industry," International Journal of Production Economics, Elsevier, vol. 137(1), pages 84-93.
    10. Yoon Lee & Maria Marshall, 2013. "Goal Orientation and Performance of Family Businesses," Journal of Family and Economic Issues, Springer, vol. 34(3), pages 265-274, September.
    11. Orens, Raf & Reheul, Anne-Mie, 2013. "Do CEO demographics explain cash holdings in SMEs?," European Management Journal, Elsevier, vol. 31(6), pages 549-563.
    12. Pankaj C. Patel & Betty Conklin, 2012. "Perceived Labor Productivity in Small Firms—The Effects of High–Performance Work Systems and Group Culture through Employee Retention," Entrepreneurship Theory and Practice, , vol. 36(2), pages 205-235, March.

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    More about this item

    Keywords

    company characteristics; construction sector; financial performance; management practices; small business; owner-manager characteristics; L20; L74; M10;
    All these keywords.

    JEL classification:

    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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