A selection of interesting research and articles we found recently.

Leader-follower trust enhances business performance
Fenwick Jing and his associates reported a range of positive effects on performance in firms with trusting relationships between leaders and followers. The researchers used six measures of performance derived from surveys conducted in 100 small professional service firms: financial outcomes, staff and customer satisfaction, productivity, and staff and manager tenure.

Firms with high levels of manager–follower trust outperformed their low-trust peers on all measures. Importantly, the findings indicate that retaining managers and staff in small firms is associated with high levels of manager–follower trust.

More details are available in Jing, F.F., Avery, G.C. & Bergsteiner, H. 2014. Enhancing multiple dimensions of performance in small professional firms through leader-follower trust.
Asia-Pacific Journal of Human Resources, 52, 351-369.


Communicating and sharing a vision raises firm performance
The effects of shared visions on performance are not fully understood, particularly in small professional service settings, namely in Australian retail pharmacies. Adopting a multi-stakeholder, multi-measure approach the study examined the relationship between vision-communication and -sharing on performance using five measures—financial assessments, employee and customer satisfaction, productivity, and staff retention.

The results showed that organizations where managers communicate the vision to staff and whose employees share this vision outperform their peers across all business indicators and retain their employees longer. Financial performance and productivity were higher with long-term staff and managers.

Jing, F.F., Avery, G.C. & Bergsteiner, H. 2014. Enhancing performance in small professional firms through vision communication and sharing.
Asia-Pacific Journal of Management. 31(2), 599-620.


Caring climate, job satisfaction & organizational commitment affect job performance in China
Weihui Fu and Satish Deshpande examined the direct and indirect relationships among caring climate, job satisfaction, organizational commitment, and job performance of 476 employees working in a Chinese insurance company. The result showed that caring climate had a significant direct impact on job satisfaction, organizational command, and job performance. Caring climate also had a significant indirect impact on organizational commitment through the mediating role of job satisfaction, and on job performance through the mediating role of job satisfaction and organizational commitment.

In addition, job satisfaction had significant direct impact on organizational commitment, through which it also had a significant indirect impact on job performance. Finally, organizational commitment had a significant direct impact on job performance.

Fu, W. and Deshpande, S.P. 2014. The Impact of Caring Climate, Job Satisfaction, and Organizational Commitment on Job Performance of Employees in a China’s Insurance Company.
Journal of Business Ethics, 124(2), 339-349.


Organisational climate enhances small business performance
Fenwick Jing, Gayle Avery and Harry Bergsteiner investigated the link between supportive organizational climate and performance in 100 retail pharmacies in Sydney, Australia. One manager and up to three staff members and three buying customers were interviewed in each pharmacy. Results link warm, supportive climates to higher organizational performance measured via financial performance, staff satisfaction, and customer satisfaction. A further benefit of supportive climates appears to be lower staff turnover, at least in small businesses.

Jing, F.F., Avery, G.C. & Bergsteiner, H. 2011. Organizational climate and performance in retail pharmacies.
Leadership & Organizational Development Journal, 32(3), 224-242.


CSR benefits firm value
Alan Gregory,  Rajesh Tharyan and Julie Whittaker investigated the effects of corporate social responsibility (CSR) on firm financial value, forecasted profitability, long-term growth and the cost of capital. The authors explored the possible risk (reducing) effects of CSR and their implications for financial measures of performance. In general strengths are positively valued and concerns are negatively valued, and the authors showed that these valuation effects are principally driven by CSR performance associated with better long run growth prospects. An additional minor contribution is made by a lower cost of equity capital.

Read the details at: Alan Gregory, Rajesh Tharyan and Julie Whittaker. 2014. Corporate Social Responsibility and Firm Value: Disaggregating the Effects on Cash Flow, Risk and Growth.
Journal of Business Ethics, 124(4), 633-657.

Environmental responsibility raises firm value via equity prices
Li Cai and Chaohua He analyzed the relationship between corporate environmental responsibility and long-run stock returns. By their definition, an environmentally responsible (green) company gives no environmental concern and shows environmental strength(s). Using 20 years’ data of 1992–2011, they found evidence that environmentally responsible company outperforms, in the 4th to 7th year after the screening year. An equal-weighted environmentally responsible portfolio earned an annual four-factor alpha of 4.06 % in the 4th year, 3.00 % above industry benchmarks, and 3.87 % above characteristic benchmarks.

The results are robust to alternative portfolio weighting methodologies, controlling for firm characteristics, and the removal of outliers. Testing using industry-adjusted Tobin’s Q, they found consistent evidence that environmental strength creates firm value. Cai and He argue that environmental responsibility is an intangible asset, likely to be undervalued by the market, especially in the long horizon, thereby causing environmentally responsible companies to exhibit long-horizon excess returns.

For more details: Li Cai and Chaohua He. Corporate Environmental Responsibility and Equity Prices.
Journal of Business Ethics, 2014, 125(4), 617-635.