literature review of financial performance analysis

LITERATURE REVIEW OF FINANCIAL PERFORMANCE AND FINANCIAL DISTRESS: LIQUIDITY AND PROFITABILITY ANALYSIS (FINANCIAL MANAGEMENT LITERATURE REVIEW)

• Sukenti Student of Master of Financial Management Program, University Terbuka, Indonesia

Literature article Reviewing the Effect of Liquidity and Profitability in the context of financial management, a scientific study titled Financial Performance and Financial Distress tries to provide a research hypothesis on the interaction between factors. This literature review was written using the library research approach, including information from online academic databases like Google Scholar, Mendeley, and others. The outcomes of this article's literature review are:1) Liquidity affects Financial Performance; 2) Profitability has an effect on Financial Performance; 3) Liquidity affects Financial Distress; 4) Profitability has an effect on Financial Distress; and 5) Financial Performance Affects Financial Distress; In addition to these 2 external factors that influence the endogenous variables Financial Performance and Financial Distress there are still other additional elements, like as Leverage, Solvency and Activity variables.

Agussalim, M., Ayu Rezkiana Putri, M., & Ali, H. (2016). Analysis work discipline and work spirit toward performance of employees (case study tax office Pratama two Padang). International Journal of Economic Research.

Agussalim, M., Ndraha, H. E. M., & Ali, H. (2020). The implementation quality of corporate governance with corporate values: Earning quality, investment opportunity set, and ownership concentration analysis. Talent Development and Excellence.

Aletheari, I. A. M., & Jati, I. K. (2016). Pengaruh Earning Per Share, Price Earning Ratio, Dan Book Value Per Share Pada Harga Saham. E-Jurnal Akuntansi Universitas Udayana, 17(2), 1254–1282.

Ali, H. (1926). Evolution of Tank Cascade Studies of Sri Lanka. Saudi Journal of Humanities and Social Sciences. https://doi.org/10.21276/sjhss

Ali, H., Mukhtar, & Sofwan. (2016). Work ethos and effectiveness of management transformative leadership boarding school in the Jambi Province. International Journal of Applied Business and Economic Research.

Ansori, A., & Ali, H. (2017). Analisis Pengaruh Kompetensi Dan Promosi Terhadap Kinerja Pegawai Negeri Sipil Pada Sekretariat Daerah Kabupaten Bungo. Jurnal Ilmiah Universitas Batanghari Jambi. https://doi.org/10.33087/jiubj.v15i1.198

Anwar, K., Muspawi, M., Sakdiyah, S. I., & Ali, H. (2020). The effect of principal’s leadership style on teachers’ discipline. Talent Development and Excellence.

Assagaf, A., & Ali, H. (2017). International Journal of Economics and Financial Issues Determinants of Financial Performance of State-owned Enterprises with Government Subsidy as Moderator. International Journal of Economics and Financial Issues

Bastari, A., -, H., & Ali, H. (2020). DETERMINANT SERVICE PERFORMANCE THROUGH MOTIVATION ANALYSIS AND TRANSFORMATIONAL LEADERSHIP. International Journal of Psychosocial Rehabilitation. https://doi.org/10.37200/ijpr/v24i4/pr201108

Chauhan, R., Ali, H., & Munawar, N. A. (2019). BUILDING PERFORMANCE SERVICE THROUGH TRANSFORMATIONAL LEADERSHIP ANALYSIS, WORK STRESS AND WORK MOTIVATION (EMPIRICAL CASE STUDY IN STATIONERY DISTRIBUTOR COMPANIES). Dinasti International Journal of Education Management And Social Science. https://doi.org/10.31933/dijemss.v1i1.42

Desfiandi, A., Fionita, I., & Ali, H. (2017). Implementation of the information systems and the creative economy for the competitive advantages on tourism in the province of Lampung. International Journal of Economic Research.

Djoko Setyo Widodo, P. Eddy Sanusi Silitonga, & H. A. (2017). Organizational Performance : Analysis of Transformational Leadership Style and Organizational Learning. Saudi Journal of Humanities and Social Sciences. https://doi.org/10.21276/sjhss.2017.2.3.9

Elmi, F., Setyadi, A., Regiana, L., & Ali, H. (2016). Effect of leadership style, organizational culture and emotional intelligence to learning organization: On the Human Resources Development Agency of Law and Human Rights, Ministry of Law and Human Rights. International Journal of Economic Research.

Harini, S., Hamidah, Luddin, M. R., & Ali, H. (2020). Analysis supply chain management factors of lecturer’s turnover phenomenon. International Journal of Supply Chain Management.

Hairiyah, S., & Ali, H. (2017). Customer Decision Analysis in Taking Multipurpose Loan : Promotions , Locations and Credit Procedures ( A Case of the Bank " PQR Jakarta "). Saudi Journal of Business and Management Studies. https://doi.org/10.21276/sjbms.2017.2.3.6

Haitao, N., & Ali, H. (2022). THE ROLE OF BANKING AND GOVERNMENT POLICY ON THE ECONOMIC SECTOR DURING THE COVID-19 PANDEMIC. Dinasti International Journal of Digital Business Management, 3(2), 161–169.

Limakrisna, N., Noor, Z. Z., & Ali, H. (2016). Model of employee performance: The empirical study at civil servants in government of west java province. International Journal of Economic Research.

Masydzulhak, P. D., Ali, P. D. H., & Anggraeni, L. D. (2016). The Influence of work Motivationand Job Satisfaction on Employee Performance and Organizational Commitment Satisfaction as an Intervening Variable in PT. Asian Isuzu Casting Center. In Journal of Research in Business and Management.

Munawar, N. A., & Saputra, F. (2021). Application Of Business Ethics And Business Law On Economic Democracy That Impacts Business Sustainability. Journal of Law Politic and Humanities, 1(3), 115–125.

Munawar, N. A., & Saputra, F. (2022). Determination of Public Purchasing Power and Brand Image of Cooking Oil Scarcity and Price Increases of Essential Commodities. International Journal of Advanced Multidisciplinary, 1(1), 34–44. No, P., Sanusi, A., Desfiandi, A., Ali, H., St, A. B., & Ct, R. A. (2017). PERFORMANCE-BASED ON THE HIGHER EDUCATION QUALITY IN PRIVATE COLLEGES. Proeeding MICIMA.

Pitri, A., Ali, H., & Us, K. A. (2022). Faktor-Faktor Yang Mempengaruhi Pendidikan Islam : Paradigma , Berpikir Kesisteman Dan Kebijakan Pemerintah ( Literature Review Manajemen Pendidikan ). 2(1), 23–40.

Prayetno, S., & Ali, H. (2017). Analysis of advocates organizational commitment and advocates work motivation to advocates performance and its impact on performance advocates office. International Journal of Economic Research.

Prayetno, S., & Ali, H. (2020). The influence of work motivation, entrepreneurship knowledge and advocate independence on advocate performance. International Journal of Innovation, Creativity and Change, 12(3), 147–164.

Prihartono, & Ali, H. (2020). The promises ethics and marketing concept strategy as a competitive advantage on private higher education (A survey on perception of product attributes and promotion mix in Indonesia). Talent Development and Excellence.

Richardo, Hussin, M., Bin Norman, M. H., & Ali, H. (2020). A student loyalty model: Promotion, products, and registration decision analysis-Case study of griya english fun learning at the tutoring institute in wonosobo central Java. International Journal of Innovation, Creativity and Change.

Riyanto, S., B, S., & Ali, H. (2017). The Influence of Workplace Spirituality and Oganizational Culture on Employee Engagement of Y Generation in PT. Krama Yudha Tiga Berlian Motors (KTB). The International Journal of Social Sciences and Humanities Invention. https://doi.org/10.18535/ijsshi/v4i7.05

Riyanto, S., Pratomo, A., & Ali, H. (2017). EFFECT OF COMPENSATION AND JOB INSECURITY ON EMPLOYEE ENGAGEMENT (STUDY ON EMPLOYEE OF BUSINESS COMPETITION SUPERVISORY COMMISSION SECRETARIAT). International Journal of Advanced Research. https://doi.org/10.21474/ijar01/4139

Riyanto, S., Yanti, R. R., & Ali, H. (2017). The Effect of Training and Organizational Commitment on Performance of State University of Jakarta Student Cooperative (KOPMA UNJ) Management. Saudi Journal of Humanities and Social Sciences. https://doi.org/10.21276/sjhss

Saputra, F. (2022a). Analysis Effect Return on Assets (ROA), Return on Equity (ROE) and Price Earning Ratio (PER) on Stock Prices of Coal Companies in the Indonesia Stock Exchange (IDX) Period 2018-2021. Dinasti International Journal of Economics, Finance and Accounting, 3(1), 82–94. http://repository.uph.edu/41805/%0Ahttp://repository.uph.edu/41805/4/Chapter1.pdf

Saputra, F. (2022b). The Role of Human Resources , Hardware , and Databases in Mass Media Companies. International Journal of Advanced Multidisciplinary, 1(1), 45–52.

Sudiantini, D. (2020). Empirical Testing of Climate Work as Moderating at Regional Public Service. 151(Icmae), 47–49. https://doi.org/10.2991/aebmr.k.200915.012

Sudiantini, D., & Dewi Shinta, N. (2018). Pengaruh Media Pembelajaran Terhadap Kemampuan Berpikir Kreatif dan Penalaran Matematis Siswa. Sintesa, 11(1), 177–186. http://ojs.umsida.ac.id/index.php/pedagogia/article/view/69/75

Sutiksno, SDU, Rufaidah, P., Ali, H., & Souisa, W. (2017). Tinjauan Literatur Pemasaran Strategis dan Pandangan Berbasis Sumber Daya Perusahaan. Int. J. Ekonomi. Res, 14(8), 59–73.

Widayati, C. C., Ali, H., Permana, D., & Nugroho, A. (2020). The role of destination image on visiting decisions through word of mouth in urban tourism in Yogyakarta. International Journal of Innovation, Creativity and Change.

Wangsih, D. (2021). Influence Of Leverage, Firm Size, And Sales Growth On Financial Distress (Empirical Study on Retail Trade Sub-Sector Companies Listed in Indonesia Stock Exchange Period 2016-2020). International Journal of Economics, Business and Accounting Research (IJEBAR), 5(4).

Widodo, D. S., Silitonga, P. E. S., & Ali, H. (2020). The influence of good governance, culture, and performance in increasing public satisfaction and implication to public trust: Study in Indonesian government. Talent Development and Excellence.

Yacob, S., Sucherly, Sari, D., Mulyana, A., & Ali, H. (2020). An Optimising strategy for minimarket modern retail business performance in Indonesia. International Journal of Innovation, Creativity and Change.

• DOWNLOAD ARTICLE FULL PDF

Authors who publish their manuscripts in this journal agree to the following conditions:

• The copyright on each article belongs to the author(s).
• The author acknowledges that the Dinasti International Journal of Digital Business Management (DIJDBM) has the right to be the first to publish with a Creative Commons Attribution 4.0 International license  (Attribution 4.0 International (CC BY 4.0).
• Authors can submit articles separately, arrange for the non-exclusive distribution of manuscripts that have been published in this journal into other versions (e.g., sent to the author's institutional repository, publication into books, etc.), by acknowledging that the manuscript has been published for the first time in the Dinasti International Journal of Digital Business Management (DIJDBM).

• Peer Reviewers
• Peer Review Process
• Aim and Scope
• Publication Ethics
• Online Submission Guidelines
• Article Processing Charge
• Open Access Statement
• License Term
• Histori Jurnal
• Plagiarisme Policy
• Archive Policy
• Author Guidelines

E-ISSN: 2715-4203

P-ISSN: 2715-419X

EDITORIAL OFFICE

Casa Amira Prive Jl. H. Risin No. 64D Pondok Jagung Timur, Serpong Utara, Tangerang Selatan, Indonesia

Unipark Condominium, Block D 3-9 Selangor, Malaysia

Singapore 655B Jurong West ST 61#12-542 Singapore 642655

Dinasti International Journal of Digital Business Management (DIJDBM) is managed and published by Dinasti Publisher  under the auspices of the  Yayasan Dharma Indonesia Tercinta (DINASTI)  and in collaboration with several institutions, the Faculty of Education, the National University of Malaysia, Faculty of Economics, Krisnadwipayana University, Faculty of Economics and Business, Winaya Mukti University, Bandung, Faculty of Economics, Muhammadiyah University Cirebon, Corruption Supervisory Commission (KPK Tipikor), Ekasakti University, Padang Indonesian Academy of Accountancy, Piksi Ganesha Polytechnic, Bandung, Bogor Academy of Technology, Bogor Telecommunication Academy, Indonesian National Tourism Academy, Bandung, Indonesian Polytechnic Piksi Ganesha, Kebumen, STIES Indonesia Purwakarta, STMIK Farewell, Kerawang and STIE Mahaputra Riau.

CONTACT INFO

https://dinastipub.org/DIJDBM

DIJDBM INDEX

Financial statement analysis: Principal component analysis (PCA) approach case study on China telecoms industry

Asian Journal of Accounting Research

ISSN : 2459-9700

Article publication date: 3 September 2019

Issue publication date: 11 December 2019

The Chinese Telecoms Industry has been rapidly growing over the years since 2001. An analysis of financial performance of the three giants in this industry is very important. However, it is difficult to know how many ratios can be used best with little information loss. The paper aims to discuss this issue.

Design/methodology/approach

A total of 18 financial ratios were calculated based on the financial statements for three companies, namely, China Mobile, China Unicom and China Telecom for a period of 17 years. A principal component analysis was run to come up with variables with significance value above 0.5 from each component.

At the end, the authors conclude how financial performance can be analysed using 12 ratios instead of the costly analysis of too many ratios that may be complex to interpret. The results also showed that ratios are all related as they come from the same statements, hence, the authors can use a few to represent the rest with limited loss of information.

Originality/value

This study will help different stakeholders who are interested in the financial performance of each company by giving them a shorter way to analyse performance. It will also assist those who do financial reporting on picking the ratios which matter in reflecting the performance of their companies. The use of PCA gives unbiased ratios that are most significant in assessing performance.

• Performance analysis
• Financial ratios
• Principal component analysis
• China telecoms industry

Mbona, R.M. and Yusheng, K. (2019), "Financial statement analysis: Principal component analysis (PCA) approach case study on China telecoms industry", Asian Journal of Accounting Research , Vol. 4 No. 2, pp. 233-245. https://doi.org/10.1108/AJAR-05-2019-0037

Emerald Publishing Limited

Copyright © 2019, Reginald Masimba Mbona and Kong Yusheng

Published in Asian Journal of Accounting Research . Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

Introduction

The financial performance of a company is a primary concern for every stakeholder especially for investors, both aspiring and current ones. The measurement of the financial health of a company through the reported financial statements gives a qualitative analysis of the company’s position as well as an account of how the company has utilised its capital in production. According to Bhunia et al. (2011) , financial performance analysis involves using reported results in a company’s financial statements to obtain the quantitative performance characteristics of a company with the aim of determining how efficient the company has been in terms of the use of their resources according to the decisions made by the management.

Financial statement analysis using ratios has been one of the most commonly used primary models of assessing business performance. It is one of the primary models of assessment of a firm’s performance over years and as well as comparing it to the rest of the players in the industry. Due to limited time for those who do the analysis of financial statements and also given the fact that these ratios are mostly correlated, the number of ratios that are being evaluated has to be reduced so that focus is given to a few with minimum loss of data ( Taylor, 1986 ). Using principal component analysis (PCA), the study reduced the number of variables for any further regression analysis from 17 variables to 3 variables. Likewise, the number of ratios that are important have also been reduced with only significant ratios for each principal component now being used to analyse the performance of these companies as well as their industry. This study proves that the performance of a company can be analysed using just a few factors or by focusing on fewer ratios, which is cost effective with lesser time as well as obtaining more precise results that have least duplication of calculations.

Since 2002, China has been the largest telecom market by subscriber base and the industry has been attracting a lot of investment within and outside China ( Uria-Recio and O’Connor, 2004 ). The telecom industry in China has been the backbone of the economy that is highly dependent on the internet and online services ( Grubman, 2010 ). Their research, innovation and building of different technologies including the current 5G that they are jointly working on have given China high growth to make it compete with countries like the USA that are considered as earlier entrants into this market. Their internet and data services have facilitated access to online shopping, IPTV, online messaging and calling platforms, data cloud and many other services that are available at very fast speed and cheap rates. The rapid build-up of the industry’s infrastructure has been the main sign of the aggressive growth and development over the past two decades ( Lu, 2000 ).

The Chinese Telecom industry was heavily controlled by the government through the ownership and formation of policies on investment, areas of operations and tariffs charged. In late 2001, China successfully joined the World Trade Organization and this meant that it had to adjust some of its policies including regulations on players in its telecoms industry. Even though they opened the doors for foreigners, this industry remained monopolised by the three state-owned companies who have been competing for the highest market share, best financial performance and top innovation into new technologies including 5G network. Over the past years, they have cemented their dominance by taking over the other small players in the industry that were state owned as well. This study, thus, seeks to assess the financial performance of this industry since the doors for open competition were opened in this sector.

China Telecom Limited

China Telecom is an incorporated company in the People’s Republic of China as China Telecom Corporation Limited with the aim of providing information services. These are, but not limited to wireline and telecommunication services, broadband and wireless internet access services, information services and other services that relate to information and telecommunications. According to the company’s report, there were at least 250m mobile subscribers, 134m broadband subscribers and 122m active access lines. The company is currently listed on the Hong Kong Stock Exchange and the New York Stock Exchange where they trade American Depositary Shares ( Telecom, 2019 ).

China Mobile Limited

This is a company which is incorporated on Hong Kong and New York Stock Exchanges since 1997 with a constituent stock of Hang Seng Index in Hong Kong. Since its formation, China Mobile has grown to have the highest market share in the telecommunications globally with the highest number of subscribers, of which 887m are mobile subscribers while 113m of them are broadband subscribers. Mobile services in the form of mobile voice and data services are the main businesses of the company and other services include wireline broadband and other services in the telecommunications industry ( Mobile, 2019 ).

China Unicom (Hong Kong) Limited

China Unicom, which was formed in 1994, is one of the oldest Telecoms Company in China and in the 2000s was listed on the Hong Kong and New York Stock Exchange. The company is the second largest mobile services provider in China with a subscriber base of 248m mobile subscribers, and 60m fixed line subscribers. Their service coverage includes all the telecommunications services and it has been doing exceptionally well in the mobile and fixed networks provision ( Unicom, 2019 ).

The rest of this paper is structured as follows: literature review, research objectives, methodology, discussion and analysis of results and finally the conclusion.

Literature review

Financial analysis involves the use of quantitative information from financial statements, that is, income statement, balance sheet and statement of cash flows in order to come up with relationships of the items that are reported by the company according to the accounting standards for reporting. In doing this, the company is able to evaluate its decisions during a financial year or a given period and see its strengths, weaknesses and areas that need attention in the organisation ( Abraham, 2004 ; Bhargava, 2017 ; Schönbohm, 2013 ). Additionally, “they also provide clues on where the management might find more resources to boost its revenue” ( Mahajan and Yaday, 2016 ). In a case study on India’s telecommunications industry, Bhargava (2017) concludes that due to the increased contribution of the telecoms industry to different economies the financial health of the industry is important to the whole economy. Therefore, there is need for measurement of this constantly to monitor the economic performance of the whole industry. The telecoms industry is highly capital intensive and investors will be interested in knowing the “the financial condition and worthiness” of the industry which is achieved through financial analysis. However, even though it is beneficial it has to be noted that the ratios isolate the assessed factors from the rest of the report; hence, precaution has to be taken when interpreting them ( Abraham, 2004 ).

Even though ratios were seen as less significant due to the introduction of more sophisticated statistical analysis tools, authors still believe that they are still a useful tool in measuring performance. For example, a study which was done by Altman (1968) proved how ratios are still useful in prediction of bankruptcy using the case of manufacturing firms. Other studies on proving the importance and usefulness of ratios by Lewellen (2004) and Floros et al. (2009) found that investment ratios are useful in predicting market values of shares.

With this in mind, this study looks at internal determinants of performance as in the study by Allen et al. (2011) and another by Burja (2011) . These are factors within the control of management and can be able to influence them through their decisions. Through this, “the management can anticipate changes in the external environment and try to position the company to take advantage of anticipated developments” ( Burja, 2011 ). The external environment includes factors like demographic changes, GDP, inflation and other external environmental factors. However, besides the quantitative factors, management also have to analyse qualitative factors internally and externally even though these have no standard set to assess them as their measurement can be highly subjective.

A lot of other case studies have been done on financial performance analysis using ratios ( Eversull and Rotan, 1997 ; Collier et al. , 2010 ; Hossan and Habib, 2010 ; Grubman, 2010 ; Bhargava, 2017 ). For example Al-Jafari and Al Samman (2015) investigated the determinants of profitability for industrial firms in Oman. By utilising ordinary least squares (OLS) model on seven ratios, they drew up conclusions on the relationship between profitability ratios and other calculated non-profitability ratios. They found that there is a positive significant relationship between profitability, firm size, growth, fixed assets and working capital. Additionally, they also conclude that management efficiency on these large firms gives them better profit returns.

While Burja (2011) only focussed on the micro or internal environment in his regression analysis of financial performance, Allen et al. (2011) carried out an investigation on both internal and external environment to see how it impacts the profitability of the firm. This was a distinguished study as it included both internal and external factors in the regression analysis.

In a case study on the furniture industry, Traian-Ovidiu and Daniel-Teodor (2013 ) and Tsuji (2014) made a detailed analysis of a company’s statements to aid those who use them for investment decisions. Their studies focussed on bringing together financial ratios from financial statements and market data from stock markets to see how the indices on the market are influenced by the performance of different rations on the reported statements.

A study on the Indian public sector looked at how strategic industries with the government as major player performs financially ( Bhunia et al. , 2011 ). The case study looked at the ratios for India’s pharmaceutical industry financial reports. Using a number of statistical methods including standard deviation, mean and also regression analysis, they established the relationship between profit measure and other performance measures.

According to Buse et al. (2010 ) economic rate of return (ERR) is an important ratio in financial statement analysis because they considered it as an indicator of the economic performance of a company. In their study, they took ERR as a comprehensive ratio that looks at the organisation return and contribution with consideration of both internal and external factors affecting the business.

Kofi-Akrofi (2013 ) carried out a similar study but he, however, used multiple regression to look at the profitability of Telecommunications in Ghana for a period of four years. In his research, the main objective was to establish the relationship between the two main statements, hence, he treated them as independent from each other. A study by Oloko et al. (2014) looked at the telecoms industry but they focussed on how management style, cost of labour and competition impacts performance and profitability of Kenya’s Telkom.

While the literature reviewed covers a number of case studies on financial statements using ratios, some gaps exist. First, we have found that none has so far focussed on the Chinese telecoms especially the period after the Chinese Government opened its doors to the world to invest in their industries. Second, few research studies have used PCA to find out which ratios give best performance analysis with least loss of data from amongst the pool of all ratios. From the review of the past studies, we realized that different ratios were used and some are correlated because they are all from the same statements. A similar study was done by Taylor (1986) which focussed on the Australian firms. The study did not point to a specific industry; hence, with differences in industries the model might not be a one-size-fits-all especially given also the differences in the operational environment between China and Australia. Third, using PCA allows the use of at least 18 ratios reducing subjectivity effects on which ratios should be used for further analysis which include regression analysis on performance. Finally, as shown in our correlation matric we can see that all ratios are related which means that there is no independency to carry out the regression. This relationship comes from the fact that these ratios use data from the same statement. By applying PCA we create new independent variables that allow for effective further analysis with even lesser variables.

To carry out a PCA on 18 financial ratios for the Chinese Telecoms Industry to reduce the number of variables.

To analyse how the components are related to each other.

To recommend a combination or mix of ratios that best assess and analyse performance in the industry.

To examine the ratios with highest variation and assess their impact on the industry.

Methodology

In previous studies on relationship analysis for financial statements and financial ratios, two models have mainly been used. The first one is the panel OLS regression model which has been applied by a number of accounting articles on financial performance and in most literature less than ten variables are used ( Al-Jafari and Al Samman, 2015 ; Jakob, 2017 ; Burja, 2011 ). The second model has been the multiple regression which was adopted by other researchers ( Bhunia et al. , 2011 ; Kofi-Akrofi, 2013 ; Buse et al. , 2010 ).

In this research, we use PCA which is a statistical tool that is used to reduce the variables that are used in data analysis with minimum loss of the original data ( Karamizadeh et al. , 2013 ). It has been used in a number of industries with one of the most common being in biometrics or “bioimaging” where physical features are used to identify a person with application on mobile phones, security systems. PCA has also been used for dimension reduction of large volumes of data and also in image compressing ( Arab et al. , 2018 ; Karamizadeh et al. , 2013 ; Polyak and Mikhail, 2017 ). The application of PCA in reducing variables as already noted in the literature review makes it a useful tool in modern days where large volumes of data are compiled and compared for its usefulness. In accounting field, PCA was used in a study by Taylor (1986) to reduce the number of ratios used in analysis of Australian companies since a lot of ratios are available, this makes the model very useful in helping investors and those who study ratios on knowing the most important ratios as it offers a way to reduce the numbers of ratios by statistically taking those that are most important with limited bias. The fact that PCA creates a new set of artificial variables which are independent makes it less complex to do regressions and come up with conclusions on related variables. In itself the PCA only reduces the variables that can be further used for regression analysis.

The first principal component combines the X -variables that have the maximum variance amongst all the combinations. Much of the variation in the data is taken by this first component. The second one likewise also takes the maximum remaining variation in the data with the condition that the correlation between the first and the second component is 0. This continues until the “ i th” component, which will account to the last variation that has not been accounted for by the other components with the condition still remaining that its correlation with the other components is 0. This condition is what creates the independence of the variable being used.

The principal component estimation uses eigenvectors as the coefficient to come up with the following basic equations: (1) Y 1 = e ˆ 11 Z X 1 + e ˆ 12 Z X 2 + e ˆ 13 Z X 3 + ⋯ + e ˆ 1 i Z X i , (2) Y 2 = e ˆ 21 Z X 1 + e ˆ 22 Z X 2 + e ˆ 23 Z X 3 + ⋯ + e ˆ 2 i Z X i , (3) Y i = e ˆ i 1 Z X 1 + e ˆ i 2 Z X 2 + e ˆ i 3 Z X 3 + ⋯ + e ˆ i i Z X i , where Y is the principal component; e ˆ the eigenvector; ZX the standardized value of the ratios used.

A total of 18 accounting ratios that are used in most literature in accounting and are deemed to be the most important measures of profitability, liquidity, management efficiency, leverage, valuation and growth, cash flow indicator and effective tax rate. This list, however, is not exhaustive; it has the ability to cover more ratios. Some of the ratios differ from the ones by Taylor (1986) because they are more relevant to the telecoms industry as used in previous studies. Second, in his study, Taylor used “debt coverage” due to missing data for interest cover but for this study we used interest cover as all relevant data were available ( Table I ).

The data used are from 2001 to 2017. This is the period that has financial statements available on the websites of the companies. Statistical Package for Social Sciences 20 was then used for the analysis of the financial statement with Microsoft Excel 13 used in the calculation of the final coefficients for each principal component. Standardized data were used instead of the original data as the ratios have different units of measurement. If the raw data are used, then a PCA will tend to give more emphasis to those variables that have higher variances than those variables that have lower variances meaning results will depend on the unit of measurement for each variable and since these data do not have that we used the standardized values.

All the financial data are secondary data taken from the company’s annual financial reports as presented on their websites and also from trusted journals and websites ( Table II ).

The matrix in Table III shows the relations within the ratios, which means we cannot have any ratio that is independent from the other, hence, we cannot use these ratios in regression as independent variables. This means we need to create new variables using PCA that will be independent from each other.

Results and discussion

The financial statements of the three telecoms companies in China were used to assess the firms’ performance. Thus, PCA was adopted to suggest the most suitable ratios that can best explain the firms’ performance while ensuring minimum data loss among the pool of ratios. Using the data from the industry, which is described in Table II , we use standardized values of the ratios in the extraction of the principal component.

In this section, we first examined the components that have been extracted and the new independent variables according to our first objectives. Then second, we looked at the ratio mix that can be used for analysis of the telecoms industry performance.

Based on the extraction in Table IV , we only need four components to use as variables in the telecoms industry instead of the initial 18. These new variables are not only independent but are more easily comparable than the initial variables we had. The first principal component covers the highest variation in the data with an initial eigenvalue of 7.982, which represent 44.344 per cent of the variance. Three other components needed to, at least, get to 85 per cent of the variance, which is significant with least data being lost in the analysis. This contradicts with the initial conclusion that was made on Australian firms, who used similar ratios but got four components at 64.8 per cent Taylor (1986) . This variation is huge and is likely to be because of these data being focussed on one industry, hence, reducing the differences in valuation and reports of numerous firms. The increased percentage means there is lesser data loss from the four components and this allows for better analysis of the financial statements. From the PCA for the telecoms industry, we remain with four variables, Y1–Y4 whose calculation based on Equations (1) –( 3) ( Table V ).

Table VI shows us the mix of ratios that PCA extract to give significant analysis on the performance of the telecoms industry. The 12 ratios represent the mix that has important ratios from the classes that we have in general. The performance of the telecoms industry is measured mainly with four classes of ratios.

First, profitability of the company is very important as also concluded in research studies by Altman (1968) , Collier et al. (2010) and Mahajan and Yaday (2016) . In component 1, we see profitability measures having a very significant value of above 0.8. This is supported through most literatures that use the profitability of a firm as one of the primary indicators of its performance or as the dependent variable in most of the regression analysis, for example, return on assets ROA which was used by Kofi-Akrofi (2013 ) and Al-Jafari and Al Samman (2015) . Profit maximisation should be the main goal of management so as to give the high return expected by their shareholders and measured by ROSE. This is achieved by maintaining a high and constant profit margin throughout operations of the industry with a balance being kept between the profits and the expenditure of the firm especially in the salaries.

Second, liquidity in the industry is very important as proved by component 1. From the analysis, we established the importance of working capital assets as well as the importance of the operating cash to the firms which are also included in literature as significant measures as in the studies published by Bhunia et al. (2011) , Neves (2011) , Baños-Caballero et al. (2012) , Knauer and Wöhrmann (2013) . Operating cash has the highest value in component 1 which may signify its importance in the industry. The combination of the cash and the other current assets shows how performance in this industry is dependent on the liquid assets at the disposal of the firms. These resources are important for use in growth and expansion of operations. In analysing the individual companies it is interesting to see how failure to maintain high liquidity has led to the struggle of China Telecom and China Unicom to perform well and this supports what Singhania et al. (2014) noted the necessity of maintaining a balance between liquidity and profitability. In an analysis done on individual companies as the study built on the industry average, it was observed that China Telecom and China Unicom have been struggling to maintain favourable liquidity balances which has always left them as market followers behind China Mobile in terms of ability to generate profits, launch new services and upgrad to newer technologies including 4G network coverage.

Third, the management efficiency in the industry has also been argued by Al-Jafari and Al Samman (2015) in their study on firms in Omani. The decisions of management in allocation of their short-term resources are of importance and the relationship of this with the liquidity is that short-term decision of management in allocation of their non-fixed assets has impact on their performance. The use of the current ratios to measure their performance gets rid of the historical cost effect from the valuation of fixed assets, which makes it difficult to measure current performance. This factor supports the fact that we can measure the quality of management decisions through analysis of the financial results by relating their outcome to turnover. Even though in 2015 the Chinese Government introduced the tower company to take over network towers of the industry, DBS Vickers Securities (2015) noted that the effect of this on the performance of the company cannot be reflected. This is even though we cannot ignore it as this analysis put more emphasis on liquid resources of the company. Management also has to effectively allocate its expenses to the salaries and wages of its workers as this ratio is important in this service industry. There is need to always keep a favourable rate of return per worker for the industry which means that worker reward should always be related to what is being gained from the output of that worker. Whilst within the service industry there is no specific and accurate measure of the output, we can use the revenue paid to workers to see their relationship with the turnover. The higher this is, the better.

Of particular interest in our findings is the importance of customer growth and revenue per customer. As companies in the industry compete for customers, they still need to find the balance between customer growth and what they gain from it (revenue from the customer). With the government regulating the tariffs Zhiling (2002) and also as companies running different promotions to lure customers to their network, there is a need for management to keep that growth balancing with the revenue growth. In analysing the industrial data, we have noted that the revenue growth is not matching the customer growth and as a result this is very risky for the industry players that may be aiming for customers at the expense of high revenues as it will not be beneficial to its investors. This eventually can lead to a conflict between the government and other shareholders as the company tries to offer services to all at affordable rates with the public shareholder that will mainly be looking forward to high returns from the customer base.

In the financing section, only equity ratio is included in the components. The absence of the interest cover in measuring of performance is likely to prove that the model of financing is not of great importance when measuring the performance in the industry, which has very high capital requirements through investment in fixed assets. However, the allocation of capital is very important as also supported by the return of stockholder equity ratio. This means that management is expected to generate high returns for its shareholders in all their operations. The interests of the shareholders are further cemented by the EPS that needs to remain high and be maintained as the firms grow. The other stakeholders with fixed returns like the fixed tax, fixed interest always have their returns regardless of the performance yet the shareholders’ returns are based on how the firm has performed. Management has to keep a low volatility in their EPS and ROCE to maintain high investment and also attract more investors and partners.

Based on the results from the PCA analysis carried on 18 ratios over 17 years, profitability, liquidity, customer growth and management efficiency are the main performance highlighters for the industry. Maintaining all these will result in favourable returns to the shareholder of this industry. We cannot look at these factors in isolation as they are correlated and they are all combined when assessing the overall performance of the industry or individual firms. A combination of 12 ratios is able to give meaningful conclusion about the industry and can effectively analyse operations of the firms.

Further studies

According to Jakob (2017) , state-owned enterprises are often claimed to be less profitable and less efficient compared to private corporations. A comparison can be carried out within an environment that has both private and public firms. In 2015, the Chinese Government introduced the tower company to take over network towers of the industry DBS Vickers Securities (2015 ). It will be important to see how this change is important and can benefit other governments and industry as well if they implement it.

List of accounting ratios used as variable

Descriptive statistics for telecoms industry

Inter-item correlation matrix for China telecoms Industry

Total variance explained

Abraham , A. ( 2004 ), “ A model of financial performance analysis adapted for nonprofit organisations ”, AFAANZ 2004 Conference Proceedings. University of Wollongong: Research Online , Alice Springs, NT , 4-6 July .

Al-Jafari , M.K. and Al Samman , H. ( 2015 ), “ Determinants of profitability: evidence from industrial companies listed on muscat securities market ”, Review of European Studies , Vol. 7 No. 11 , pp. 303 - 311 .

Allen , A.J. , Shaik , S. , Myles , A.E. and Yeboah , O.-A. ( 2011 ), “ Determinants of profitability performance: an analysis of class I railroads in the United States ”, Southern Agricultural Economics Association Annual Meeting. Corpus Christi, TX .

Altman , E.I. ( 1968 ), “ Financial ratios, discriminant analysis and the prediction of corporate bankruptcy ”, The Journal of Finance , Vol. 23 No. 4 , pp. 589 - 609 .

Arab , A. , Harbi , J. and Abbas , A.H. ( 2018 ), “ Image compression using principal component analysis ”, Al-Mustansiriyah Journal of Science , Vol. 29 No. 4 , pp. 141 - 146 .

Baños-Caballero , S. , García-Teruel , P.J. and Martínez-Solano , P. ( 2012 ), “ How does working capital management affect the profitability of Spanish SMEs? ”, Small Bus Econ , Vol. 39 , pp. 517 - 529 .

Bhargava , P.D. ( 2017 ), “ Financial analysis of information and technology industry of India (a case study of Wipro Ltd and Infosys Ltd) ”, Journal of Accounting, Finance and Auditing Studies , Vol. 3 No. 3 , pp. 1 - 13 .

Bhunia , A. , Mukhuti , S.S. and Roy , S.G. ( 2011 ), “ Financial performance analysis-a case study ”, Current Research Journal of Social Sciences , Vol. 3 No. 3 , pp. 269 - 275 .

Burja , C. ( 2011 ), “ Factors influencing the companies’ profitability ”, Annales Universitatis Apulensis Series Oeconomica , Vol. 3 No. 2 , pp. 215 - 224 .

Buse , L. , Ganea , M. and Circiumaru , D. ( 2010 ), Using Linear Regression in the Analysis of Financial-Economic Performances. C01-G30 , University of Craiova , Craiova , Vol. 2 No. 38 , pp. 1 - 12 .

Collier , H.W. , Grai , T. , Haslitt , S. and Mcgowan , C.B. Jr ( 2010 ), “ Using actual financial accounting information to conduct financial ratio analysis: the case of Motorola ”, Journal of Business Case Studies , Vol. 6 No. 4 , pp. 24 - 32 .

DBS Vickers Securities ( 2015 ), China Telecom Sector. China/Hong Kong Industry Focus , DBS Vickers (Hong Kong) Limited , Hong Kong .

Eversull , E.E. and Rotan , B.L. ( 1997 ), Analysis of Financial Statements: Local Farm Supply, Marketing Cooperatives , Rural Business-Cooperative Service US Department of Agriculture , Washington, DC , Vol. 154 , p. 37 .

Floros , C. , Jaffry , S. and Ghulam , Y. ( 2009 ), “ Predicting returns with financial ratios: evidence from Greece ”, International Journal of Financial Economics and Econometrics , Vol. 14 No. 1 , pp. 31 - 44 .

Grubman , J.B. ( 2010 ), “ Challenges for China’s telecom industry in an increasingly all broadband/mobile world ”, Deutsche Bank 2010 China Access Conference, Magee Group, LLC , Beijing , January 14 .

Hossan , F. and Habib , M.A. ( 2010 ), “ Performance evaluation and ratio analysis of pharmaceutical company in Bangladesh ”, master’s thesis, International Business, University West, Trollhättan , pp. 1 - 64 .

Jakob , B. ( 2017 ), “ Performance in strategic sectors: a comparison of profitability and efficiency of state-owned enterprises and private corporations ”, The Park Place Economist , Vol. 25 No. 1 , pp. 9 - 20 .

Karamizadeh , S. , Abdullah , S.M. , Manaf , A.A. , Zamani , M. and Hooman , A. ( 2013 ), “ An overview of principal component analysis ”, Journal of Signal and Information Processing , Vol. 4 , pp. 173 - 175 .

Knauer , T. and Wöhrmann , A. ( 2013 ), “ Working capital management and firm profitability ”, Journal of Management Control , Vol. 24 , pp. 77 - 87 .

Kofi-Akrofi , G.Y. ( 2013 ), “ Profitability analysis of the telecommunications industry in Ghana from 2002 to 2006 ”, Asian Journal of Business Management , Vol. 5 No. 1 , pp. 60 - 76 .

Lewellen , J. ( 2004 ), “ Predicting returns with financial ratios ”, Journal of Financial Economics , Vol. 74 No. 2 , pp. 209 - 235 .

Lu , D. ( 2000 ), “ China’s telecommunications infrastructure buildup on its own way ”, in Ito , T. and Krueger , A.O. (Eds), Deregulation and Interdependence in the Asia-Pacific Region, NBER-EASE , University of Chicago Press , pp. 371 - 413 .

Mahajan , N. and Yaday , A. ( 2016 ), “ A financial statement analysis- case study for an industry ”, International Journal of Engineering and Technical Research , Vol. 5 No. 3 , pp. 6 - 8 .

Mobile , C. ( 2019 ), “ Overview ”, available at: www.chinamobileltd.com/en/about/overview.php (accessed March 3, 2019 ).

Neves , L.F.G. ( 2011 ), “ Working capital management and profitability: the telecom case ”, Master in Finance, Instituto Universitario de Lisboa, Lisbon , pp. 1 - 63 .

Oloko , M. , Anene , E.B. and Kathambi , I. ( 2014 ), “ Empirical analysis on determinants of non-profitability margins: a case of Telkom Kenya in telecommunications industry ”, International Journal of Scientific and Research Publications , Vol. 4 No. 3 , pp. 1 - 4 .

Polyak , B. and Mikhail , K. ( 2017 ), “ Principle component analysis: robust versions ”, Automation and Remote Control , Vol. 78 No. 3 , pp. 490 - 506 .

Schönbohm , A. ( 2013 ), “ Performance measurement and management with financial ratios – the BASF SE Case ”, in Bruche , G. , Dörrenbächer , C. , Nagel , F. and Ripsas , S. (Eds), Berlin School of Economics and Law , Berlin , pp. 1 - 27 .

Singhania , M. , Rohit , Y.J. and Sharma , N. ( 2014 ), “ Working capital management and profitability: evidence from Indian manufacturing companies ”, Decision , Vol. 41 No. 3 , pp. 313 - 326 .

Taylor , S.L. ( 1986 ), “ Analysing financial statements: how many variables should we look at? ”, The Securities Institute Journal , Vol. 1 , April , pp. 19 - 21 .

Telecom , C. ( 2019 ), “ Overview ”, available at: www.chinatelecom-h.com/en/company/company_overview.php (accessed March 3, 2019 ).

Traian-Ovidiu , C. and Daniel-Teodor , V. ( 2013 ), “ Case study on analysis of financial statements at a furniture manufacturer ”, Journal of Knowledge Management, Economics and Information Technology , Vol. III No. 5 , pp. 1 - 24 .

Tsuji , C. ( 2014 ), “ Exploring the financial ratios: the case study of the famed chemical industry firms in the US ”, Case Studies in Business and Management , Vol. 1 No. 2 , pp. 11 - 21 .

Unicom , C. ( 2019 ), “ Company profile ”, available at: www.chinaunicom.com.hk/en/about/profile.php (accessed March 3, 2019 ).

Uria-Recio , P. and O’Connor , D.S.W.H. ( 2004 ), “ China telecommunications panorama ”, Telephony world, pp. 1-4, available at: www.casaasia.es/pdf/310550620PM1109693180696.pdf (accessed March 15, 2019 ).

Zhiling , S. ( 2002 ), China Telecommunications Industry – The Forbidden City in the Information Age? Political and Economic Structural Changes in Asia , Institute for Research in Economics and Business Administration Bergen , Bergen .

Corresponding author

Related articles, we’re listening — tell us what you think, something didn’t work….

Report bugs here

All feedback is valuable

Please share your general feedback

Join us on our journey

Platform update page.

Visit emeraldpublishing.com/platformupdate to discover the latest news and updates

Questions & More Information

Answers to the most commonly asked questions here

An official website of the United States government

The .gov means it’s official. Federal government websites often end in .gov or .mil. Before sharing sensitive information, make sure you’re on a federal government site.

The site is secure. The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely.

• Publications
• Account settings

Preview improvements coming to the PMC website in October 2024. Learn More or Try it out now .

• Advanced Search
• Journal List
• Front Public Health

COVID-19 and financial performance: Pre and post effect of COVID-19 on organization performance; A study based on South Asian economy

Syed usman qadri.

1 School of Management, Jiangsu University, Zhenjiang, China

Zhiqiang Ma

Mohsin raza.

2 Department of Management Science, TIMES Institute, Multan, Pakistan

Mingxing Li

Safwan qadri.

3 Department of Public Administration, Wuhan University, Wuhan, China

Chengang Ye

4 Department of Management Science, Business School, University of International Business and Economics, Beijing, China

Haoyang Xie

5 School of Information and Computing Sciences, Zhejiang University, Hangzhou, China

Associated Data

The raw data supporting the conclusions of this article will be made available by the authors, without undue reservation.

The COVID-19 epidemic has damaged developing as well as developed economies and reduced the profitability of several companies. Technological advancement plays a vital role in the company's performance in this current situation. All activities carry on virtually. In this study, the financial performance of enterprises in the South Asian banking industry will be compared before and after the COVID-19 epidemic. Furthermore, the full influence of the pandemic will take place in the long run. This study also explains the technological effect on improving performance, especially during the period of the COVID-19 pandemic. It has an impact on people's social lives as well as the economic world. This study examined a sample of 34 banks from the South Asian region from 2016 to 2021. A Wilcox rank test was used to determine whether there was a significant difference before and after the epidemic era. The overall conclusion of this study is that the COVID-19 pandemic had a significant influence on the bank's financial performance, particularly in terms of profitability. But technological advancement has a positive effect on organizational performance, ultimately increasing the financial performance of South Asian banks. And there is a big difference between pre-pandemic and post-pandemic organizational performance. The findings of this study have significant policy implications since it is clear that cooperation among governments, banks, regulatory agencies, and central banks is necessary to address the financial and economic effects of the COVID-19 pandemic.

1. Introduction

The global pandemic COVID-19, a coronavirus pandemic, has had a disproportionate impact on the world's social, economic, political, and religious systems ( 1 ). On December 31, 2019, Dr. Tedros Adhanom Ghebreyesus, Director of the World Health Organization, declared the coronavirus a public health emergency ( 2 ). The whole corporate world confronts various obstacles in the business climate in 2020, including the collapse of oil prices and the release of a new version of COVID-19 ( 3 , 4 ). This destructive and upgraded form of COVID-19 not only has an impact on the health and prosperity of the people living in society, but it also causes instability in the global economy ( 5 , 6 ). After the declaration of WHO COVID-19 as a worldwide pandemic, the whole globe was declared a global lockdown ( 7 ). As a result, both corporate and non-profit organizations have been horrified by the international pandemic issue of COVID-19 ( 3 ). This widespread shutdown harmed all macroeconomic metrics (e.g., oil prices, unemployment rates, commodity prices, inflation rates, etc.). Ultimately, many organizations' financial performance suffers, and the majority of employees are dismissed or work from home ( 2 ). IMF data shows that global GDP will fall by 3.2 percent in 2020. Furthermore, GDP in advanced markets falls by 4.6 percent, GDP in emerging markets falls by 2.1 percent, and GDP in developing markets falls by 2.0 percent. The author estimates that the firms' second quarter revenues in 2020 will decline by 80 percent, 60 percent, and 50 percent, respectively ( 8 ). As a result, the development of this pandemic has necessitated tight and prompt measures and policies from local governments as well as local authorities to restrict viral transmission ( 9 ). The rapid reaction of the government and local authorities to the spread of this virus led to behavioral and psychological changes in the general public, as well as a reduction in the social gap between them ( 9 ). International authorities have also taken rigorous measures such as banning air travel, halting international tourism, restricting ridership, reducing inter-country travel, and so on ( 9 ). The spread of the global pandemic affects the east, west, north, and south counties, and the country faces on economic recession ( 10 , 11 ). Finally, in 2020, the world economy will confront a major threat in the form of the new COVID-19 pandemic. Furthermore, in this pandemic situation, social work has become increasingly difficult to perform due to lockdown ( 12 , 13 ). Government restrictions are reducing in-person services in the services sector. The service sector includes banks, telecommunications, financial institutions, postal services, insurance companies, and software development firms ( 14 ).

Numerous sectors operate in the global economy, but two (manufacturing and services) are regarded as the most important because they contribute significantly to global GDP. According to the IMF's ( 15 ), the services sector contributed 63.6 percent of the world's GDP ( 16 ). There is a lot of literature available on the manufacturing sector that is affected by the global pandemic. Therefore, I have selected the services sector to learn about the effect of COVID-19. Erden and Aslan ( 17 ) concluded that banks are included in the services sector that has been impacted by the pandemic ( 18 ). The term “bank” appears for the first time in history in Italy. There is no common definition of a bank in the international literature. A general definition will be made after a few definitions are given here. A bank is defined as an enterprise that accepts deposits from individuals and invests in various sectors in order to pay the individual a margin ( 19 ). The financial performance of the banking sector has had ups and downs during COVID-19 ( 20 ). The global financial crisis is a major danger to the banking sector in South Asia, as it reduces banking performance ( 21 ). A number of other events that occurred in the past will have an impact on the financial performance of the baking sector. The Crimean War of 1854, which took place between Russia and the Ottomans, affected the banking sector. As a result, the Ottoman bank's performance decreased due to that war. The global financial crisis of 2008 also had a great impact on the banking industry in South Asian banks. Ultimately, it will affect the financial performance of the banking sector. Another event in the downfall of tourism in Sri Lanka is that it accounts for 12 percent of the country's GDP ( 22 ). It will also affect the banking sector of Sri Lanka As a result, the financial performance of Sri Lanka's banking sector has deteriorated. The financial crisis of 2008 significantly contributed to the lower efficiency of Bangladesh's banking sector. Burki and Niazi ( 23 ) discovered that the banking industry's financial performance declined from 1991 to 2000. The author of the study stated that local banks, as well as international banks and Islamic banks, saw a reduction in performance during and post the pandemic period. As a result, financial performance is seen as a tool for analyzing how firms can successfully execute ( 24 ).

All of the preceding discussion was about signaling theory because a bad signal is sent to the market in the form of war, a crisis, or pandemic ( 25 ). It will decrease the performance of the different companies. The researcher, ( 26 ) argues that the market generates both positive and negative signals for business users. As a result, these signals are regarded by business users as information and educate them about the company's present financial health. Positive and negative signals can have an impact on investment decisions and market circumstances. The COVID-19 sends out negative signals to the market and has an impact on every industry of business. People tend to avoid investing after such a terrible epidemic indicator and prefer to cut their losses by withdrawing investments ( 27 ). These types of bad signals will also result in a lower level of economic activity and a reduction in economic growth. The existing literature explores several methods to assess a company's financial performance, such as profitability, liquidity, solvency, and activity ( 24 , 28 , 29 ). A lot of methods are available for financial performance, which include the CAMEL Model, VAIC Model, TOPSIS Model, MCDM Model, DEA Model, and the Financial Ratios Analysis Method ( 30 – 36 ).

There has been a significant disruption in the global business world as many firms have been forced to close due to the current COVID-19 epidemic. Based on the above COVID-19 and financial performance, it is required to undertake research to assess the financial performance of the South Asian banking system both before and after the pandemic. But the advancement and development of technology can have a positive impact on employees' performance as well as improve the overall performance of the South Asian banking industry ( 37 ). Technological advancement is the combination of creating new knowledge and generating new ideas that will impact the overall performance of companies ( 38 ). Internal business progress drives technological advancement, and internal business progress is dependent on the organizational workforce ( 39 ). The studies of Alam and Murad ( 40 ); Song et al. ( 41 ), Sapta et al. ( 42 ) explore that there is a close relationship between technological advancement and employee performance. So, advancements in technology, particularly in ICT (information and communication technology), can result in an increase in productivity or enhanced performance ( 43 ). Hence, the objective of this research is to forecast financial performance and the effects of COVID-19 on the financial performance of South Asian banks and also to see if there are any variations in financial performance between the pre and post COVID-19 pandemics. Further, how does technological advancement increase the overall performance of the South Asian banks? The contributions of our research are as follows: Theoretically, it multiplies the effects of COVID-19 on the financial performance of South Asian banks across industries. Most of the previous studies carried out have mainly focused on the effects of the COVID pandemic on the manufacturing sector at the macro-level of the economy. Few researchers focused on the effect of the pandemic on South Asian markets or on Pakistan, Sri Lanka, and Bangladesh's financial markets. Practically, it will assist policymakers in developing policies to deal with COVID-19 pandemics or emergency situations. The final part examines the financial impacts of major pandemics and other uncontrollable events on the economy. The reaction of the markets to COVID-19 has already been studied in detail by Liu et al. ( 44 ), Narayan et al. ( 45 ), and Wang et al. ( 46 ).

2. Related literature and hypothesis development

2.1. financial performance and ratios analysis.

Financial performance analysis is regarded as the most significant analysis since it assists users (investors, shareholders, stakeholders, managers, owners, and so on) in determining whether or not the organization is functioning successfully ( 47 ). Ratio Analysis, on the other hand, is a crucial technique for analyzing a company's financial performance ( 48 ). It is also beneficial to understand the company's strengths, weaknesses, opportunities, and threats. Based on the information presented above, it is determined that ratio analysis is carried out through the financial statements of the firms in order to learn about the financial performance of the companies. The existing literature ( 24 , 28 , 29 ) divided the ratios into the following main heads, which included profitability, liquidity, solvency, and activity.

2.1.1. Profitability measures

2.1.1.1. return on assets.

There are several ratios that are used to assess a company's earnings and profitability. Balasundaram ( 49 ) suggests that ROA is the best way to measure a company's profitability based on these measures. This ratio is used to determine if a company's assets are being used to generate profits as well as how much profit is earned on the basis of the company's assets ( 50 , 51 ). A higher ratio indicates that the firm is operating well, and vice versa. We use the following formula to compute the ROA: net income/total assets.

H 1 There is significant difference in return on assets pre and post pandemic of south Asian banks.

2.1.1.2. Earning per share

This ratio is also used to assess the company's profitability. The study of Darya ( 52 ) that the EPS demonstrates a company's performance; if the earnings per share are high, the shareholder wealth is maximized, and the company's rate of return is likewise high ( 53 ). This ratio is also beneficial to investors, as they must examine it before investing in any stock. Divide net income by the number of shares in circulation to get earnings per share.

H 2 There is significant difference in earning per share pre and post pandemic of south Asian banks.

2.1.2. Performance measures

2.1.2.1. return on equity.

Different ratios are used to assess corporate performance. ROE is the most important ratio for assessing a company's success. The ultimate goal of an investor is to maximize their wealth and grow the margin on their stock in that firm, which can be measured using ROE ( 54 ). The higher the ROE, the greater the shareholder wealth. Divide the company's net income by its total equity to arrive at this ratio.

H 3 There is significant difference in return on equity pre and post pandemic of south Asian banks.

2.1.2.2. Total assets turnover ratio

Another metric used to assess a company's performance is the Total Assets Turnover Ratio. According to Ellis ( 55 ), asset turnover or utilization measures which assets are capable of generating and what the organization really generates from that asset. The research by Jose et al. ( 56 ) and Seema et al. ( 57 ) demonstrates that asset utilization has a major impact on a firm's financial success. This ratio is calculated by dividing total sales or revenue by total assets.

H 4 There is significant difference in total assets turnover pre and post pandemic south Asian banks.

2.1.3. Leverage measure

2.1.3.1. debt to equity ratio.

Solvency ratios are another name for leverage ratios. These ratios indicate a company's capacity to satisfy its short-term and long-term obligations through stock or debt ( 58 ). A company that has a larger proportion of debt than equity is more likely to fail ( 59 ). In the event of insolvency, the corporation has the capacity to pay its debts promptly by liquidating its assets ( 59 ). This ratio is calculated by total liabilities, or debt, divided by total equity.

H 5 There is significant difference in debt-to-equity pre and post pandemic of south Asian banks.

2.1.3.2. Debt to total assets ratio

This ratio, DTAR, is also known as a leverage ratio since it indicates how many assets a firm has to service its debts ( 5 ). In other words, it indicates how much debt is covered by the company's total assets. DTAR is used to calculate the amount of leverage, or how much debt is used to acquire assets. This ratio is calculated by dividing total debt by total assets.

H 6 There is significant difference in debt to assets pre and post pandemic south Asian banks.

3. Materials and methods

3.1. study design.

This is quantitative research that compares the effects of the pandemic on organizational performance in the banking industry before and after the epidemic. The model is based on earlier research conducted by Daryanto and Rizki ( 58 ). The data is collected from the official websites of South Asian banks.

3.2. Study model

Figure 1 represent the model which we have been followed for this study. We have collected the data from official websites of the banks of South Asia. By using the collected data, we find out the ROS, EPS, ROE, TAT, DER and DAT. And also check that there is any difference between the pre and post pandemic period.

Study model.

3.3. Data collection and sources of this study

All of the data used in this study came from secondary sources, including the official websites of South Asian banks. To meet the study's goal, data is gathered for 6 years, with the year chosen depending on the most recent year. All 6 years were separated into two parts: the first 3 years, from 2016 to 2018, were considered pre-pandemic, and the remaining 3 years, from 2019 to 2021, were considered post-pandemic. This study examined a sample of 34 banks from the South Asian region from 2016 to 2021. Only banks with the most recent financial statements from 2021 are included in the data sample; banks without financial statements during that time period are excluded. Then, examine the financial performance of the pre-pandemic and post-pandemic periods. The scope of the study is broad because it includes the banking system of Pakistan, Sri Lanka, and Bangladesh banking systems. With the help of parent articles ( 58 ), we determine the population size N for the requirement of an article. Because without knowing the actual population of any study, we can't estimate the data size. In the given reference article, we considered the time period 2016–2020. In this article, we considered period from 2016 to 2021, increasing the time duration due to the improvement of results.

4. Results and findings

4.1. correlation matrix.

Table 1 shows the correlation between all the studied variables. The result of −1 indicates a perfectly negative linear correlation between two variables, while the result of 0 indicates no linear correlation between two variables, and 1 indicates a perfectly positive linear correlation between two variables. The overall result of the correlation matrix shows that all the variables have a strong positive relationship with each other.

Correlation matrix of all variables.

4.2. Financial statistic

The ROA, which gauges the total profitability of the banking industry, has been declining since 2016 and will continue to do so until 2019. Figure 2 also illustrates that the ROA of banks was at its lowest during the post-pandemic period. Figure 2 also reveals that the ROA was 73 prior to the pandemic, but it has fallen while COVID is at its highest in 2019. The EPSPS share ratio is beneficial from the investor's point of view. The EPS in the post-pandemic era is much higher than in the pre-pandemic period. The EPS has now been raised to 6.96 in 2021 because of the banks' profit margin increase in 2021. ROE shows the owner's contribution to the company. The ROE has been improving over the period from 2016 to 2021. In the pandemic period, businesses face losses, and the owner's equity is more equity in their business for survival. The total asset turnover ratio is used to evaluate an organization's performance. The bank's TATR declines significantly from 2016 to 2021, as seen in Figure 2 . It was 6.96 before the epidemic, but it has dropped to 6.36 since then. The DER ratio is used to assess a company's leverage; the greater the ratio, the more leveraged and riskier the corporation. The overall results show that the South Asian banks have low leverage. Another ratio used to assess the company's leverage is total debt to total assets. In the epidemic phase, it declines continuously.

Graphical representation of financial ratios.

Figure 2 represents the overall average of different ratios in the pre- and post-pandemic periods. On the X axis, all the ratios are presented, while on the Y axis, the results of the different ratios are presented. And the graphical representation shows that the results are better in the pre-pandemic period than in the post-pandemic period.

4.3. Descriptive statistic

Table 2 displays descriptive statistics for the gathered data, including (minimum value, maximum value, mean, and standard deviation) for all variables of banks listed on the Pakistan Stock Exchange from 2016 to 2021. According to Table 2 , the mean value of ROA in the pre-pandemic period was −3.24 and in the post-pandemic period was −1.73. This clearly demonstrates that ROA decreases during the epidemic but increases somewhat in 2021. In the post-pandemic phase, the residual ROE, EPS, TAT, DER, and TDTA all grow. This is because, after the epidemic period is over, the firms' net income rises, which influences all ratios. Based on the findings, we may conclude that the COVID-19 pandemic condition is hazardous for the banking sector of Pakistan.

Data descriptive statistics results for all variable pre and post pandemic period.

4.4. Wilcoxon signed-rank test

The Wilcoxon Signed Ranks Test in Table 3 reveals for the first ROA, the banks have a negative rank of 20 and a positive rank of 13, indicating that the ROA is lower and the Z score is −1.58 shown in Table 4 . It indicates that the ROA differs between the before and after pandemic periods. As a result, we may deduce that ROA is falling year after year. As a result, we accept the first hypothesis, which states that there is a difference in return on assets before and after the pandemic, but this difference is not important because it has a.114 meaningful value. In the instance of EPS, it has 10 negative rankings and 24 positives rankings, with a Z score of −2.599 shown in Table 4 , indicating that there is a difference in EPS between the pre and post pandemic periods. While the difference is noteworthy since it has a value of 0.001, which is smaller than the value of 0.005. The second hypothesis is likewise accepted on the basis of the first. The next metric is the ROE, which indicates that the banking sector's ROE is higher than it was before the epidemic. As a result, we can infer that the ROE has increased year after year. However, the rank test reveals that it has 15 negative rankings and 13 positive rankings, indicating that the ROE differs between the pre and post pandemic periods. As a result, the third hypothesis, that there is a significant difference in the return on equity before and after the pandemic, is accepted. The performance of banks is judged by the TAT ratio, which has a lower negative rank than a higher positive rank. The Z score for that ratio is −1.957 shown in Table 4 , but it is not significant because it is more than 0.005. As a result, the notion that TAT differs between pre and post-pandemic is accepted. Similarly, the DER and TDTA are used to assess bank liquidity. Both have a greater positive rank than a negative rank, and the Z values are −1.510 and −0.644, respectively shown in Table 4 , with no significant difference. As a result, the remaining two hypotheses are likewise accepted.

Wilcoxon signed-rank test results.

a. ROA post-pandemic < ROA pre-pandemic.

b. ROA post-pandemic > ROA pre-pandemic.

c. ROA post-pandemic = ROA pre-pandemic.

d. EPS post-pandemic < EPS pre-pandemic.

e. EPS post-pandemic > EPS pre-pandemic.

f. EPS post-pandemic = EPS pre-pandemic.

g. ROE post-pandemic < ROE pre-pandemic.

h. ROE post-pandemic > ROE pre-pandemic.

i. ROE post-pandemic = ROE pre-pandemic.

j. TAT post-pandemic < TAT pre-pandemic.

k. TAT post-pandemic > TAT pre-pandemic.

l. TAT post-pandemic = TAT pre-pandemic.

m. DER post-pandemic < DER pre-pandemic.

n. DER post-pandemic > DER pre-pandemic.

o. DER post-pandemic = DER pre-pandemic.

p. TDTA post-pandemic < TDTA pre-pandemic.

q. TDTA post-pandemic > TDTA pre-pandemic.

r. TDTA post-pandemic = TDTA pre-pandemic.

Test statistics.

a. Wilcoxon signed ranks test.

b. Based on positive ranks.

c. Based on negative ranks.

Table 5 presents the descriptive statistics of the banks listed on the South Asian markets untill December 2021. The average returns of all banks in south Asian markets were negative during the pandemic period. However, because the COVID-19 epidemic in Pakistan is less severe than in other nations, the average return increases year after year. The data also suggests that the average return in Sri Lanka is lower since the country is more influenced by COVID-19. As a result, the country's financial performance suffers more during a pandemic. This result is consistent with Goodell ( 60 ) study that the financial sector is vulnerable during a pandemic and economic recession because of the possible occurrence of excessive bad loans and massive deposit withdrawals in a short time. The overall results show that all the south Asian Bankss' performance was positively influenced by the lockdown. Finally, our empirical findings back up ( 60 ) study, which focuses on the harmful consequences of COVID-19 on the banking industry. Because of the high risk of increasing bad debts and abnormally large withdrawals that may cause corporate crises or even bankruptcy, financial firms' stocks are among the most seriously affected securities on stock markets during a pandemic.

Year wise comparison of financial ratios.

4.5. Endogeneity

The results of Table 6 endogeneity show that the model has endogeneity because the probability of Durbin and Wu-Hausman F (1,312) is 0.7054, which is insignificant and accepts the null hypothesis that variables are exogenous. There is no evidence of endogeneity in the model.

The result of endogeneity.

Table 7 shows the average return in terms of net profit of the south Asian banking industry. It's clearly shows that the results of the net profitability are decrease during the 2019 and 2021. But the net profitability of the banks is sufficient in 2016 to 2018. And the main reasons of decreasing the profitability during 2019 to 2021 is the COVID-19 pandemic affects. Because of the businesses are close down during pandemic. But banking fall in the services sector so, they don't stop their operations completely. They working during the period of pandemic through different modes like internet banking or through internet apps.

Year wise average return.

5. Discussion

The goal of this study was to assess the financial performance of the banking industry before and after the epidemic. The COVID-19 has a great impact on each business, especially the south Asian banking sector. During the pandemic period, Pakistan's government is also fighting against COVID-19 through social distancing and lockdown ( 61 ). The National Bank of Pakistan continues its operations through advanced technology (internet). Mostly, banks have shifted to a mobile app, and a user can make any transaction (withdraw, transfer) by using this app. Same as that in Bangladesh, where the government declared a general holiday for 2 months from March 26 to May 30 ( 62 ). The banks had continued their work on a small scale during the pandemic situation ( 63 ). They are also using the latest technology and providing e-services to their customers. Then there is no need to attack the branches physically. This will also maintain the social distance because no one will come to the branches. Sri Lanka, another famous tourist destination in the South Asian region, is also affected by this pandemic. The economy of said country is also dependent on the services sector, and the economy is declining badly. The country removes travel restrictions in 2021, which is a positive sign of recovery of 0.1% in said year ( 64 ). In Sri Lanka, the banks are also continuing their banking operations during COVID-19 for many reasons. One of the most important reasons for continuous operation in Sri Lanka is that the banks are responsible for payment and settlement systems. Therefore, the central bank of Sri Lanka (CBSL) authorizes the banks to regulate and supervise the payment, clearing, and settlement systems. Hence, banking operations continue during the period of COVID-19 in the south Asian banking sector. These banks perform their operations through the OTS (online transaction system), and some banks have shifted to mobile apps through which a customer can get the same services as banks. In the period, those banks have decreased their margins because they are not using the internet or advancing in technology. Therefore, in 2021, banks will improve their financial performance. In South Asia, the banking sector works for the government in the collection of taxes and the disbursement of cash for government expenditures. And almost all of the businesses working around the globe also depend on the banking sector. If the banks are closed during COVID-19, then the most critical situations will happen, and every business will face them. The banks play a vital role in emerging economies; if they close their operations during the pandemic period, the economies will face the following problems: lack of short-term and long-term capital financing; increased unemployment; a falling economic growth rate; increased interest rates; and much more ( 65 ).

The COVID-19 has negative impact on the financial performance of the banking industry in South Asia. As a result, the ROA of banks' assets has decreased throughout the epidemic era. As a consequence, the first hypothesis is accepted that there is significant difference in return on assets pre and post pandemic of south. The return on assets more decrease during the period of COVID-19. This finding supports the recent research of ( 63 , 65 ), who discovered that the ROA decreased during the COVID-19 period. The second theory is concerning EPS, which is accepted and confirmed by Aprilia and Oetomo ( 66 ). Based on the rank test, the third hypothesis demonstrated that there is a difference in ROE between the pre and post pandemic periods, and the result is consistent with the previous study by Esomar and Christianty ( 67 ), in which the author stated that there were significant differences in ROE before and during the COVID-19 pandemic. The alternative explanation is also acceptable, since statistical data demonstrates a difference in performance between the pre and post pandemic periods. Daryanto and Rizki ( 58 ) prior investigation yielded similar results.

Finally, the banking sector plays a very important role in the economic development and growth of a country ( 68 ). But the overall performance of the banking sector is affected by many factors. COVID-19 is considered an important factor that affects the financial performance of the banking sector in South Asia. In this situation, the banking sector improves its performance through many indicators, which include IT adoption, technological advancement, and improved customer experience. A study by Dadoukis et al. ( 69 ) confirms that high IT-adopters improve their performance as compared to low IT-adopters in the period of the pandemic. All the businesses are closed during this time, but the banks are using the latest technology to run the business smoothly. Customers can perform transactions from their homes without standing in line at the banks. During the period of the pandemic, most banks will waive their transaction charges (free bank transfers through apps). The advancement in technology is measured through different things like mobile apps, social factors, free e-transactions, etc. This study is in line with previous research ( 70 ), which states that technology advancement is very influential in employee performance, ultimately increasing the performance of South Asian banks. The results of this study will also aid policymakers in developing policies to handle such crucial situations.

6. Conclusion

The purpose of this study is to analyse the financial performance of the South Asian banking sector before and after the COVID-19 pandemic. Using overall performance measures, liquidity, solvency, profitability, and activity ratios, it is found that the company had better performance before the pandemic. But the same was disturbed during the period of the COVID-19 pandemic, resulting in a decline. Another finding that we made was that the performance before and after the pandemic had significant differences, mainly in liquidity ratios, solvency ratios, and profitability ratios. Finally, we can conclude that banks can maintain their position in the business world because they do not stop working even in the pandemic period. They offer their service through technological advancement, and in the period 2021, they improve their performance as compared to the other pandemic periods. The said study is helpful for business owners, shareholders, and governments to understand the effect of COVID-19 on financial performance, especially in the banking sector, which has greatly contributed to the development of the country. We exclusively compared the organizational performance of the South Asian banking sector before and after the COVID-19 period. We gathered data from the most recent years, from 2016 to 2021, to assess organizational effectiveness. There are numerous other factors that influence stock markets during pandemics; however, this study did not take these into account and instead focused solely on the COVID-19 pandemic. Meanwhile, this study only examined the banking sector; further research might be conducted to examine other manufacturing sectors in order to provide more generalized conclusions. Furthermore, the study can be used to assess the organization's performance in relation to other variables, such as management strategies and decisions taken during the pandemic.

Data availability statement

Author contributions.

ZM, SUQ, and ML contributed to conception and design of the study. SQ organized the database. SUQ and MR performed the statistical analysis. CY, ML, and SUQ wrote the first draft of the manuscript. ZM, SUQ, SQ, and MR wrote sections of the manuscript. HX contributed to correlation matrix and interpret results. All authors contributed to the article and approved the submitted version.

Funding Statement

This study was funded by Key Program of National Social Science Fund of China (21AZD067).

Conflict of interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Publisher's note

All claims expressed in this article are solely those of the authors and do not necessarily represent those of their affiliated organizations, or those of the publisher, the editors and the reviewers. Any product that may be evaluated in this article, or claim that may be made by its manufacturer, is not guaranteed or endorsed by the publisher.

CSR in times of crisis: a systematic literature review

• Published: 27 May 2024

Cite this article

• Dejan Glavas   ORCID: orcid.org/0000-0002-3168-2222 1 &
• Giovanni Visentin 2  

46 Accesses

1 Altmetric

Explore all metrics

This study assesses the strategic value of corporate social responsibility (CSR) investments and their impact on corporate resilience during financial crises. We examine three main hypotheses—“Doing well by doing good,” “Delegated philanthropy,” and “Insider-initiated philanthropy”—to understand what motivates companies to participate in CSR activities in times of economic turmoil. Using a systematic literature review of peer-reviewed journal articles within social sciences, extracted from Scopus and Web of Science, we adhered to Preferred Reporting Items for Systematic Reviews and Meta-Analyses guidelines to screen 1022 studies, ultimately yielding a final sample of 33 key high-quality studies. Our analysis reveals that a significant number of studies support the “Doing well by doing good” hypothesis, which suggests that CSR investments not only sustain financial performance but also serve as a crucial resilience mechanism in tumultuous economic times. Our findings reveal that investment in CSR enables firms to build social capital that pays off during financial crises by fostering trust between the firm and its stakeholders.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price includes VAT (Russian Federation)

Instant access to the full article PDF.

Rent this article via DeepDyve

Institutional subscriptions

Similar content being viewed by others

Did Corporate Social Responsibility Vaccinate Corporations Against COVID-19?

The COVID-19 global crisis and corporate social responsibility

Meta-analyses on Corporate Social Responsibility (CSR): a literature review

Data availability.

The datasets supporting the conclusions of this article are included within the article in Tables 1 , 2 , 3 . Restrictions apply to the availability of the raw data from the 1022 studies initially extracted from Scopus and Web of Science databases. Access to these raw datasets can be granted by the authors upon a reasonable request, subject to obtaining permission from Scopus and Web of Science.

The software is based on the Python language, it is used for machine learning applications and is downloadable here: https://orangedatamining.com/ .

Aerts W, Cormier D (2009) Media legitimacy and corporate environmental communication. Account Organ Soc 34:1–27. https://doi.org/10.1016/j.aos.2008.02.005

Article   Google Scholar  

Ahmed Haji A (2013) Corporate social responsibility disclosures over time: evidence from Malaysia. Manag Audit J 28:647–676. https://doi.org/10.1108/MAJ-07-2012-0729

Albitar K, Al-Shaer H, Elmarzouky M (2021) Do assurance and assurance providers enhance COVID-related disclosures in CSR reports? An examination in the UK context. Int J Account Inf Manag 29(3):410–428. https://doi.org/10.1108/ijaim-01-2021-0020

Albuquerque R, Koskinen Y, Yang S, Zhang C (2020) Resiliency of environmental and social stocks: an analysis of the exogenous COVID-19 market crash. Rev Corp Financ Stud 9:593–621. https://doi.org/10.1093/rcfs/cfaa011

Al-Dah B, Dah M, Jizi M (2018) Is CSR reporting always favorable? Manag Decis 56(7):1506–1525. https://doi.org/10.1108/MD-05-2017-0540

Ali W, Bekiros S, Hussain N et al (2023) Determinants and consequences of corporate social responsibility disclosure: a survey of extant literature. J Econ Surv. https://doi.org/10.1111/joes.12556

Altaf N (2021) Two decades of big data in finance: systematic literature review and future research agenda. In: Saleem TJ, Chishti MA (eds) Big data analytics for internet of things, 1st edn. Wiley, pp 351–365

Chapter   Google Scholar  

Ashraf Z, Afshan G, Sahibzada UF (2021) Unpacking strategic corporate social responsibility in the time of crisis: a critical review. JGR. https://doi.org/10.1108/JGR-03-2021-0030

Attig N, El Ghoul S, Guedhami O, Suh J (2013) Corporate social responsibility and credit ratings. J Bus Ethics 117:679–694. https://doi.org/10.1007/s10551-013-1714-2

Bae K-H, Ghoul SE, Gong Z, Guedhami O (2021) Does CSR matter in times of crisis? Evidence from the COVID-19 pandemic. J Corp Financ 67:101876. https://doi.org/10.1016/j.jcorpfin.2020.101876

Bannier CE, Bofinger Y, Rock B (2023) Doing safe by doing good: non-financial reporting and the risk effects of corporate social responsibility. Eur Account Rev 32:903–933. https://doi.org/10.1080/09638180.2022.2042349

Bansal P, Jiang GF, Jung JC (2015) Managing responsibly in tough economic times: strategic and tactical CSR during the 2008–2009 global recession. Long Range Plan 48:69–79. https://doi.org/10.1016/j.lrp.2014.07.002

Barauskaite G, Streimikiene D (2021) Corporate social responsibility and financial performance of companies: the puzzle of concepts, definitions and assessment methods. Corp Soc Responsib Environ Manag 28:278–287. https://doi.org/10.1002/csr.2048

Barnea A, Rubin A (2010) Corporate social responsibility as a conflict between shareholders. J Bus Ethics 97:71–86. https://doi.org/10.1007/s10551-010-0496-z

Bénabou R, Tirole J (2010) Individual and corporate social responsibility. Economica 77:1–19. https://doi.org/10.1111/j.1468-0335.2009.00843.x

Berkman H, Li M, Lu H (2021) Trust and the value of CSR during the global financial crisis. Account Financ 61(3):4955–4965. https://doi.org/10.1111/acfi.12721

Block J, Wagner M (2013) The effect of family ownership on different dimensions of corporate social responsibility : evidence from large US firms. Bus Strategy Environ 23(7):475–492. https://doi.org/10.1002/bse.1798

Broadstock DC, Chan K, Cheng LTW, Wang X (2021) The role of ESG performance during times of financial crisis: evidence from COVID-19 in China. Financ Res Lett 38:101716. https://doi.org/10.1016/j.frl.2020.101716

Buchanan B, Cao CX, Chen C (2018) Corporate social responsibility, firm value, and influential institutional ownership. J Corp Financ 52:73–95. https://doi.org/10.1016/j.jcorpfin.2018.07.004

Cao Z, Rees W (2020) Do employee-friendly firms invest more efficiently? Evidence from labor investment efficiency. J Corp Financ 65:101744. https://doi.org/10.1016/j.jcorpfin.2020.101744

Cespa G, Cestone G (2007) Corporate social responsibility and managerial entrenchment. Econ Manag Strategy 16:741–771. https://doi.org/10.1111/j.1530-9134.2007.00156.x

Chakuu S, Masi D, Godsell J (2019) Exploring the relationship between mechanisms, actors and instruments in supply chain finance: a systematic literature review. Int J Prod Econ 216:35–53. https://doi.org/10.1016/j.ijpe.2019.04.013

Chaudhry SM, Saeed A, Ahmed R (2021) Carbon neutrality: the role of banks in optimal environmental management strategies. J Environ Manag 299:113545. https://doi.org/10.1016/j.jenvman.2021.113545

Chintrakarn P, Jiraporn P, Treepongkaruna S (2021) How do independent directors view corporate social responsibility (CSR) during a stressful time? Evidence from the financial crisis. Int Rev Econ Financ 71:143–160. https://doi.org/10.1016/j.iref.2020.08.007

Daugaard D (2020) Emerging new themes in environmental, social and governance investing: a systematic literature review. Account Financ 60:1501–1530. https://doi.org/10.1111/acfi.12479

Dedrick J, Gurbaxani V, Kraemer KL (2003) Information technology and economic performance: a critical review of the empirical evidence. ACM Comput Surv 35:1–28. https://doi.org/10.1145/641865.641866

Deegan C, Rankin M (1997) The materiality of environmental information to users of annual reports. Account Audit Account J 10:562–583. https://doi.org/10.1108/09513579710367485

del Rio M, Infante J, Gil-Alana LA (2021) Gender Diversity Index. Measuring persistence. Res Int Bus Financ 58:101474. https://doi.org/10.1016/j.ribaf.2021.101474

Delle Foglie A, Panetta IC (2020) Islamic stock market versus conventional: Are islamic investing a ‘Safe Haven’ for investors? A systematic literature review. Pac Basin Financ J 64:101435. https://doi.org/10.1016/j.pacfin.2020.101435

Diemont D, Moore K, Soppe A (2016) The downside of being responsible: corporate social responsibility and tail risk. J Bus Ethics 137:213–229. https://doi.org/10.1007/s10551-015-2549-9

El Ghoul S, Guedhami O, Kwok CCY, Mishra DR (2011) Does corporate social responsibility affect the cost of capital? J Bank Financ 35:2388–2406. https://doi.org/10.1016/j.jbankfin.2011.02.007

Evans A, Tzavara D (2012) Corporate social responsibility strategies in the light of the financial crisis: the case of Milan-based global companies. EJIM 6:154. https://doi.org/10.1504/EJIM.2012.045795

Fassin Y, Gosselin D (2011) The collapse of a european bank in the financial crisis: an analysis from stakeholder and ethical perspectives. J Bus Ethics 102:169–191. https://doi.org/10.1007/s10551-011-0812-2

Flammer C, Ioannou I (2021) Strategic management during the financial crisis: how firms adjust their strategic investments in response to credit market disruptions. Strateg Manag J 42:1275–1298. https://doi.org/10.1002/smj.3265

Friede G, Busch T, Bassen A (2015) ESG and financial performance: aggregated evidence from more than 2000 empirical studies. J Sustain Financ Invest 5:210–233. https://doi.org/10.1080/20430795.2015.1118917

Gillan SL, Koch A, Starks LT (2021) Firms and social responsibility: a review of ESG and CSR research in corporate finance. J Corp Financ 66:101889. https://doi.org/10.1016/j.jcorpfin.2021.101889

Glavas D, Bancel F (2023) Does state ownership impact green bond issuance ? Int Evid Financ 44(1):62–113. https://doi.org/10.3917/fina.pr.020

Godfrey PC, Merrill CB, Hansen JM (2009) The relationship between corporate social responsibility and shareholder value: an empirical test of the risk management hypothesis. Strateg Manag J 30:425–445. https://doi.org/10.1002/smj.750

Gray R, Kouhy R, Lavers S (1995) Corporate social and environmental reporting: a review of theliterature and a longitudinal study of UK disclosure. Account Audit Account J 8:47–77. https://doi.org/10.1108/09513579510146996

Greenland S, Robins JM (1985) Confounding and misclassification. Am J Epidemiol 122:495–506. https://doi.org/10.1093/oxfordjournals.aje.a114131

Grewal R, Tansuhaj P (2001) Building organizational capabilities for managing economic crisis: the role of market orientation and strategic flexibility. J Mark 65:67–80. https://doi.org/10.1509/jmkg.65.2.67.18259

Habermann F, Fischer FB (2023) Corporate social performance and the likelihood of bankruptcy: evidence from a period of economic upswing. J Bus Ethics 182(1):243–259. https://doi.org/10.1007/s10551-021-04956-4

Hannah ST, Sayari N, Harris FHB, Cain CL (2021) The direct and moderating effects of endogenous corporate social responsibility on firm valuation: theoretical and empirical evidence from the global financial crisis. J Manag Stud 58(2):421–456. https://doi.org/10.1111/joms.12586

Havlinova A, Kukacka J (2023) Corporate social responsibility and stock prices after the financial crisis: the role of strategic CSR activities. J Bus Ethics 182:223–242. https://doi.org/10.1007/s10551-021-04935-9

Hughes A (2012) Corporate ethical trading in an economic downturn: recessionary pressures and refracted responsibilities. J Econ Geogr 12:33–54. https://doi.org/10.1093/jeg/lbr004

Hyun S, Kim JM, Han J, Anderson M (2022) Female executive leadership and corporate social responsibility. Account Financ 62:3475–3511. https://doi.org/10.1111/acfi.12894

Jahmane A, Gaies B (2020) Corporate social responsibility, financial instability and corporate financial performance: linear, non-linear and spillover effects—the case of the CAC 40 companies. Financ Res Lett 34:101483. https://doi.org/10.1016/j.frl.2020.101483

Jensen MC, Meckling WH (1976) Theory of the firm: managerial behavior, agency costs and ownership structure. J Financ Econ 3:305–360. https://doi.org/10.1016/0304-405X(76)90026-X

Jiao Y (2010) Stakeholder welfare and firm value. J Bank Financ 34:2549–2561. https://doi.org/10.1016/j.jbankfin.2010.04.013

Lins KV, Servaes H, Tamayo A (2017) Social capital, trust, and firm performance: the value of corporate social responsibility during the financial crisis. J Financ 72:1785–1824. https://doi.org/10.1111/jofi.12505

Magrizos S, Apospori E, Carrigan M, Jones R (2021) Is CSR the panacea for SMEs? A study of socially responsible SMEs during economic crisis. Eur Manag J 39(2):291–303. https://doi.org/10.1016/j.emj.2020.06.002

Malik M (2015) Value-enhancing capabilities of CSR: a brief review of contemporary literature. J Bus Ethics 127:419–438. https://doi.org/10.1007/s10551-014-2051-9

Margolis JD, Elfenbein HA, Walsh JP (2009) Does it pay to be good...and does it matter? A meta-analysis of the relationship between corporate social and financial performance. SSRN J. https://doi.org/10.2139/ssrn.1866371

Marie Lauesen L (2013) CSR in the aftermath of the financial crisis. Soc Responsib J 9:641–663. https://doi.org/10.1108/SRJ-11-2012-0140

Masulis RW, Reza SW (2015) Agency problems of corporate philanthropy. Rev Financ Stud 28:592–636. https://doi.org/10.1093/rfs/hhu082

Mathes T, Walgenbach M, Antoine S-L et al (2014) Methods for systematic reviews of health economic evaluations: a systematic review, comparison, and synthesis of method literature. Med Decis Mak 34:826–840. https://doi.org/10.1177/0272989X14526470

Matos P (2020) ESG and responsible institutional investing around the world: a critical review. SSRN J. https://doi.org/10.2139/ssrn.3668998

Metaxas T, Tsavdaridou M (2013) CSR in metallurgy sector in Greece: a content analysis. Resour Policy 38:295–309. https://doi.org/10.1016/j.resourpol.2013.03.010

Mongeon P, Paul-Hus A (2016) The journal coverage of Web of Science and Scopus: a comparative analysis. Scientometrics 106:213–228. https://doi.org/10.1007/s11192-015-1765-5

Nakai M, Yamaguchi K, Takeuchi K (2016) Can SRI funds better resist global financial crisis? Evidence from Japan. Int Rev Financ Anal 48:12–20. https://doi.org/10.1016/j.irfa.2016.09.002

Omura A, Roca E, Nakai M (2021) Does responsible investing pay during economic downturns: evidence from the COVID-19 pandemic. Finance Res Lett 42:101914. https://doi.org/10.1016/j.frl.2020.101914

Orlitzky M, Schmidt FL, Rynes SL (2003) Corporate social and financial performance: a meta-analysis. Organ Stud 24:403–441. https://doi.org/10.1177/0170840603024003910

Ossenblok TLB, Verleysen FT, Engels TCE (2014) Coauthorship of journal articles and book chapters in the social sciences and humanities (2000–2010). J Asso Info Sci Technol 65:882–897. https://doi.org/10.1002/asi.23015

Ouzzani M, Hammady H, Fedorowicz Z, Elmagarmid A (2016) Rayyan—a web and mobile app for systematic reviews. Syst Rev 5:210. https://doi.org/10.1186/s13643-016-0384-4

Paul J, Lim WM, O’Cass A et al (2021) Scientific procedures and rationales for systematic literature reviews (SPAR-4-SLR). Int J Consum Stud. https://doi.org/10.1111/ijcs.12695

Petitjean M (2019) Eco-friendly policies and financial performance: was the financial crisis a game changer for large US companies? Energy Econ 80:502–511. https://doi.org/10.1016/j.eneco.2019.01.028

Raza A, Ilyas MI, Rauf R, Qamar R (2012) Relationship between corporate social responsibility (CSR) and corporate financial performance (CFP): literature review approach. Elixir Financ Manag 46:8404–8409

Google Scholar  

Roehrich JK, Lewis MA, George G (2014) Are public–private partnerships a healthy option? A systematic literature review. Soc Sci Med 113:110–119. https://doi.org/10.1016/j.socscimed.2014.03.037

Sajko M, Boone C, Buyl T (2021) CEO greed, corporate social responsibility, and organizational resilience to systemic shocks. J Manag 47(4):957–992. https://doi.org/10.1177/0149206320902528

Sakunasingha B, Jiraporn P, Uyar A (2018) Which CSR activities are more consequential? Evidence from the great recession. Financ Res Lett 27:161–168. https://doi.org/10.1016/j.frl.2018.02.003

Shamseer L, Moher D, Clarke M et al (2015) Preferred reporting items for systematic review and meta-analysis protocols (PRISMA-P) 2015: elaboration and explanation. BMJ 349:g7647–g7647. https://doi.org/10.1136/bmj.g7647

Singh A (2020) COVID-19 and safer investment bets. Financ Res Lett 36:101729. https://doi.org/10.1016/j.frl.2020.101729

Tsai H-J, Wu Y (2022) Changes in corporate social responsibility and stock performance. J Bus Ethics 178:735–755. https://doi.org/10.1007/s10551-021-04772-w

Van Beurden P, Gössling T (2008) The worth of values—a literature review on the relation between corporate social and financial performance. J Bus Ethics 82:407–424. https://doi.org/10.1007/s10551-008-9894-x

Velte P (2022) Meta-analyses on Corporate Social Responsibility (CSR): a literature review. Manag Rev Q 72:627–675. https://doi.org/10.1007/s11301-021-00211-2

Xu X, Chen X, Jia F et al (2018) Supply chain finance: a systematic literature review and bibliometric analysis. Int J Prod Econ 204:160–173. https://doi.org/10.1016/j.ijpe.2018.08.003

Yu S, Lee N (2016) Financial crisis, politically connected CEOs, and the performance of state-owned enterprises: evidence from Korea. Emerg Mark Financ Trade 52:2087–2099. https://doi.org/10.1080/1540496X.2016.1186445

Zhang L, Shan YG, Chang M (2021) Can CSR disclosure protect firm reputation during financial restatements? J Bus Ethics 173(1):157–184. https://doi.org/10.1007/s10551-020-04527-z

Download references

Acknowledgements

Our deepest gratitude is extended to everyone who has contributed to this research in various capacities. We would like to acknowledge Ms. Astrid Denimal, our research assistant for this work. Authors would like to thank the EU*Asia Institute for their support. We also wish to express our appreciation to Gilles Grolleau, Anna Dimitrova, and Alice Crepin for their extensive comments and valuable insights.

Authors do not have any funding to declare for this work.

Author information

Authors and affiliations.

AI for Sustainability Institute, ESSCA School of Management, 55 Quai Alphonse Le Gallo, 92513, Boulogne-Billancourt, France

Dejan Glavas

INCAE Business School, 2P3C+468 Campus Walter Kissling Gam, La Garita, Provincia de Alajuela, Costa Rica

Giovanni Visentin

You can also search for this author in PubMed   Google Scholar

Contributions

All authors contributed to the study conception and design. All authors read and approved the final manuscript.

Corresponding author

Correspondence to Dejan Glavas .

Ethics declarations

Conflict of interest.

The authors certify that they have no affiliations with or involvement in any organization or entity with any financial interest, or non-financial interest in the subject matter or materials discussed in this manuscript.

Additional information

Publisher's note.

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Supplementary Information

Below is the link to the electronic supplementary material.

Supplementary file1 (PDF 119 KB)

Supplementary file2 (ows 469 kb), supplementary file3 (csv 20 kb), supplementary file4 (csv 44 kb), rights and permissions.

Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Reprints and permissions

About this article

Glavas, D., Visentin, G. CSR in times of crisis: a systematic literature review. Manag Rev Q (2024). https://doi.org/10.1007/s11301-024-00445-w

Download citation

Received : 04 September 2023

Accepted : 16 May 2024

Published : 27 May 2024

DOI : https://doi.org/10.1007/s11301-024-00445-w

Share this article

Anyone you share the following link with will be able to read this content:

Sorry, a shareable link is not currently available for this article.

Provided by the Springer Nature SharedIt content-sharing initiative

• Corporate social responsibility
• Economic crises
• Systematic review

JEL Classification

• Find a journal
• Publish with us
• Track your research