The Effects of Cost Efficiency and Investment Efficiency on Value Chain Performance and Cash Flow Growth

Iranian Journal of Accounting, Auditing and Finance

مقاله 2، دوره 9، شماره 4 - شماره پیاپی 33، اسفند 2025، صفحه 27-44   

نوع مقاله: Original Article

شناسه دیجیتال (DOI): 10.22067/ijaaf.2025.46482.1513

نویسندگان

Behrooz Badpa^* ؛ Mohammad Amin Jamshidi

Department of Accounting, Faculty of Humanities, Ilam University, Ilam, Iran

چکیده

Value creation is among the top strategic goals of companies as it plays a leading role in their sustainability and success in a competitive market and often leads to their cash flow growth. One of the requirements for value creation is the efficient and effective utilization of company’s resources. In view of that, controlling costs and managing financial resources effectively as well as investing in value-creating projects can be the keys to company’s success in boosting value chain performance and cash flows. The present study was to investigate the effects of cost efficiency and investment efficiency on value chain performance and cash flow growth in companies. The statistical population consisted of the companies listed on the Tehran Stock Exchange, Iran, during 2017-2022, of which 115 samples were selected using purposive sampling. Multivariate regression was then practiced to analyze the data. The study results at the 95% confidence level demonstrated that cost efficiency and investment efficiency have significant positive effects on value chain performance. Moreover, cost efficiency and investment efficiency increase company’s cash flows. In other words, controlling and managing costs and avoiding over- or underinvestment improve overall performance in companies throughout value chain steps and lead to their cash flow growth. With respect to the study results, policymakers can effectively contribute to improving company’s performance and value creation by developing regulations, providing financial support, and establishing other incentives for the ones implementing cost efficiency as a strategic thinking.

کلیدواژه‌ها

Cost Efficiency؛ Investment Efficiency؛ Value Chain Performance؛ Cash Flow Growth؛ Stochastic Frontier Function

مراجع

1. Abbas, N., Ahmed, H., Malik, Q. A. and Waheed, A. (2018). Impact of investment efficiency on cost of equity: an empirical study on shariah and non shariah compliance firms listed on Pakistan Stock Exchange. Pakistan Administrative Review, 2(3), pp. 307-322. https://www.ssoar.info/ssoar/handle/document/60206

• Alu, A. J. (2023). Impact of project cost control on the financial performance of selected construction firms in north-central Nigeria. Educational Administration: Theory and Practice, 29(4), pp. 3610-3623. https://doi.org/10.4236/ojbm.2024.124145

3. Arianpoor, A. and Mehrfard, N. (2023). The impact of managerial attributes on cash holding and investment efficiency and the mediator role of cash holding. Journal of Islamic Accounting and Business Research, 14(4), pp. 610-628. https://doi.org/10.1108/JIABR-02-2022-0046
4. Ascioglu, A., Hegde, S. P. and McDermott, J. B. (2008). Information asymmetry and investment–cash flow sensitivity. Journal of Banking & Finance, 32(6), 1036-1048. https://doi.org/10.1016/j.jbankfin.2007.09.018
5. Badpa, B. and Mohamadvali, A. (2023). The effect of entrepreneurial orientation on the intra-firm value chain efficiency in Tehran Stock Exchange. Journal of Entrepreneurship Research, 2(3), pp. 53-72 (In Persian). https://doi.org/10.22034/jer.2023.2015847.1063
6. Beladi, H., Deng, J. and Hu, M. (2021). Cash flow uncertainty, financial constraints and R&D investment. International Review of Financial Analysis, 76, A. 101785. https://doi.org/10.1016/j.irfa.2021.101785
7. Biddle, G. C., Hilary, G. and Verdi, R. S. (2009). How does financial reporting quality relate to investment efficiency?. Journal of Accounting and Economics, 48(2-3), pp. 112-131. https://doi.org/10.1016/j.jacceco.2009.09.001
8. Blocher, E., Stout, D. and Cokins, G. (2009). Cost management: A strategic emphasis. 5th edition. McGraw-Hill, Irwin, Pennsylvania. https://www.amazon.com/Cost-Management-Strategic-Emphasis-International/dp/126571455X
9. Dechow, P. M., Kothari, S. P. and Watts, R. L. (1998). The relation between earnings and cash flows. Journal of Accounting and Economics, 25(2), pp. 133-168. https://doi.org/10.1016/S0165-4101(98)00020-2
10. Dutta, S., Narasimhan, O. and Rajiv, S. (1999). Success in high-technology markets: Is marketing capability critical?. Marketing Science, 18(4), pp. 547-568. https://doi.org/10.1287/mksc.18.4.547
11. Fang, E., Palmatier, R. W. and Steenkamp, J. B. E. (2008). Effect of service transition strategies on firm value. Journal of Marketing, 72(5), pp. 1-14. https://doi.org/10.1509/jmkg.72.5.001
12. Foroughnejad, H., Moradi Joz, M., Heidari, H. and Masoumi Khanghah, G. (2016). Stock liquidity, investment efficiency, and firm's performance: evidence from Tehran stock exchange. Journal of Investment Knowledge, 5(18), pp. 179-196 (In Persian). http://www.jik-ifea.ir/article_8624.html?lang=en
13. Frank, M. Z. and Goyal, V. K. (2009). Capital structure decisions: which factors are reliably important? Financial Management, 38(1), pp. 1-37. https://doi.org/10.1111/j.1755-053X.2009.01026.x
14. Ghaffari Darab, M., Yarmohammadian, M. H., Khorasani, E. and Alaghemandan, H. (2015). The role of value chain for improving health care quality. Health Information Management, 11(6), pp. 799-811 (In Persian). https://him.mui.ac.ir/article_11355.html
15. Gruca, T. S. and Rego, L. L. (2005). Customer satisfaction, cash flow, and shareholder value. Journal of Marketing, 69(3), pp. 115-130. https://doi.org/10.1509/jmkg.69.3.115.66364
16. Gupta, V., Mortal, S. C. and Yang, T. (2018). Entrepreneurial orientation and firm value: does managerial discretion play a role? Review of Managerial Science, 12(1), pp. 1-26. https://doi.org/10.1007/s11846-016-0210-3
17. Harymawan, I., Nasih, M., Ratri, M. C. and Nowland, J. (2019). CEO busyness and firm performance: evidence from Indonesia. Heliyon, 5(5), A. e01601. https://doi.org/10.1016/j.heliyon.2019.e01601
18. He, Y., Chen, C. and Hu, Y. (2019). Managerial overconfidence, internal financing, and investment efficiency: Evidence from China. Research in International Business and Finance, 47, pp. 501-510. https://doi.org/10.1016/j.ribaf.2018.09.010
19. Hubbard, R. G. (1998). Capital-market imperfections and investment. Journal of Economic Literature, 36(1), pp. 193-225. https://www.jstor.org/stable/2564955
20. Ju, T. L., Lin, B., Lin, C. and Kuo, H. J. (2006). TQM critical factors and KM value chain activities. Total Quality Management & Business Excellence, 17(3), pp. 373-393. https://doi.org/10.1080/14783360500451614
21. Kinyugo, J. M. (2014). The effect of cost efficiency on financial performance of companies listed on Nairobi Securities Exchange. Master's thesis in Business Administration, Faculty of Arts & Social Sciences, Law, Business, University of Nairobi, Nairobi, Kenya. https://erepository.uonbi.ac.ke/handle/11295/74950
22. Kordestani, G. H. and Mortazavi, S. M. (2011). The impact of cost efficiency on the relation between sales, general and administrative ratio (SG&A ratio) and future performance. Empirical Studies in Financial Accounting, 9(34), pp. 77-102 (In Persian). https://qjma.atu.ac.ir/article_1711.html
23. Lin, P. W. (2005). An empirical analysis of bank mergers and cost efficiency in Taiwan. Small Business Economics, 25(2), pp. 197-206. https://doi.org/10.1007/s11187-003-6451-y
24. López Salazar, A., Contreras Soto, R. and Espinosa Mosqueda, R. (2012). The impact of financial decisions and strategy on small business competitiveness. Global Journal of Business Research, 6(2), pp. 93-103. https://ideas.repec.org/a/ibf/gjbres/v6y2012i2p93-103.html
25. Luo, X. and Homburg, C. (2008). Satisfaction, complaint, and the stock value gap. Journal of Marketing, 72(4), pp. 29-43. https://doi.org/10.1509/jmkg.72.4.029
26. Madan, K. (2007). An analysis of the debt‐equity structure of leading hotel chains in India. International Journal of Contemporary Hospitality Management, 19(5), pp. 397-414. https://doi.org/10.1108/09596110710757561
27. Meeusen, W. and Van Den Broeck, J. (1977). Efficiency estimation from Cobb-Douglas production functions with composed error. International Economic Review, 18(2), pp. 435-444. https://doi.org/10.2307/2525757
28. Muñoz, F. (2013). Liquidity and firm investment: Evidence for Latin America. Journal of empirical finance, 20, pp. 18-29. https://doi.org/10.1016/j.jempfin.2012.10.001
29. Narasimhan, O., Rajiv, S. and Dutta, S. (2006). Absorptive capacity in high-technology markets: The competitive advantage of the haves. Marketing Science, 25(5), pp. 510-524. https://doi.org/10.1287/mksc.1060.0219
30. Nkundabanyanga, S. K., Akankunda, B., Nalukenge, I. and Tusiime, I. (2017). The impact of financial management practices and competitive advantage on the loan performance of MFIs. International Journal of Social Economics, 44(1), pp. 114-131. https://doi.org/10.1108/IJSE-05-2014-0104
31. Porter, M.E. (1985). Competitive advantage: creating and sustaining superior performance. New York: Free Press, New York. https://www.hbs.edu/faculty/Pages/item.aspx?num=193
32. Ray, S. C. (2002). Did India’s economic reforms improve efficiency and productivity? A nonparametric analysis of the initial evidence from manufacturing. Indian Economic Review, 37, pp. 23-57. https://www.jstor.org/stable/29794258
33. Richardson, S. (2006). Over-investment of free cash flow. Review of Accounting Studies, 11(2), pp. 159-189. http://dx.doi.org/10.1007/s11142-006-9012-1
34. Salehi, M., Zimon, G., Arianpoor, A. and Gholezoo, F. E. (2022). The impact of investment efficiency on firm value and moderating role of institutional ownership and board independence. Journal of Risk and Financial Management, 15(4), p. 170. https://doi.org/10.3390/jrfm15040170
35. Seth, H., Chadha, S., Sharma, S. K. and Ruparel, N. (2021). Exploring predictors of working capital management efficiency and their influence on firm performance: An integrated DEA-SEM approach. Benchmarking: An International Journal, 28(4), pp. 1120-1145. https://doi.org/10.1108/BIJ-05-2020-0251
36. Sharif Azadeh, M. R. and Basirat, M. (2013). Estimating technical efficiency of Iranian oil and gas pipe manufacturing industry using stochastic frontier function estimation. The Journal of Economic Studies and Policies, (24), pp. 181-200 (In Persian). https://economic.mofidu.ac.ir/article_26127.html?lang=en
37. Sun, W. and Cui, K. (2012). Value chain capability, value strategies and firm default risk. Journal of Financial Services Marketing, 17(4), pp. 301-315. https://doi.org/10.1057/fsm.2012.25
38. Sun, W., Ding, Z. and Price, J. (2020). Board structure and firm capability: an environment-embedded relationship between board diversity and marketing capability. Industrial Marketing Management, 90, pp. 14-29. https://doi.org/10.1016/j.indmarman.2020.06.010
39. Surya, B., Menne, F., Sabhan, H., Suriani, S., Abubakar, H. and Idris, M. (2021). Economic growth, increasing productivity of SMEs, and open innovation. Journal of Open Innovation: Technology, Market, and Complexity, 7(1), p. 20. https://doi.org/10.3390/joitmc7010020

• Viverita, V., Danarsari, D. N., Bustaman, Y. and Septianto, F. (2024). The effect of banks' cost efficiency and competition on liquidity creation. Banks and Bank Systems, 19(1), pp. 48-57. https://doi.org/10.21511/bbs.19(1).2024.05

41. Xu, X., Isaac, A., Hao, L. and Wang, D. (2019). Investor sentiment, innovation investment and cash dividend. International Journal of Economics and Finance, 11(7), pp. 1-97. https://doi.org/10.5539/ijef.v11n7p97
42. Zhang, Y. and Zhang, X. E. (2012). The effect of entrepreneurial orientation on business performance: A role of network capabilities in China. Journal of Chinese Entrepreneurship, 4(2), pp. 132-142. https://doi.org/10.1108/17561391211242744