Key Factors and Measures of Financial Performance: A Review Study of Multi-Industry

Abstract

Purpose: This study aims to review the empirical studies to find out which factors influence financial performance and what measures have been used to study financial performance in multi-industries.

Design/Methodology/Approach: The study consolidates empirical evidence on the factors influencing financial performance and its measures through a comprehensive literature review approach. This review includes literature that have empirically investigated financial performance across diverse industrial contexts including PPP projects, manufacturing companies, microfinance institutions, fast-moving consumer goods companies, advertising and marketing companies, social enterprises, and other non-financial corporations.

Findings: This review reveals that the factors such as leverage, liquidity, capital structure, ownership patterns, firm size, growth, and economic conditions significantly impact financial performance. However, it is observed that their significance is contingent upon the varying context. It is also important to observe that various research studied financial performance through diverse measures. Some implement accounting measures such as ROA, ROE, or ROCE. While others consider market valuations as measured by Tobin’s Q. Some studies have also used sustainability measures such as operational self-sufficiency or operational indicators including profit margins and growth rates.

Originality/Value: This study reviews the empirical research from multiple industries and since it is not focused to a specific industry, the results and insights of this study reflects broader patterns of influencing factors and measures of financial performance.

Paper Type: Review of Literature