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Mission Power and Firm Financial Performance

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  • Diego F. Téllez
  • Jesús M. Godoy

Abstract

We estimate the effect from mission statement on firm financial performance in a sample of Colombian companies. The mission power, a latent variable defined by using tools from word content analysis, is included in a structural equation model to compute its impact across two channels: the profit margin and the assets turnover. Our estimates show that the no-significant impact of mission statement, which is documented in the literature, may be caused by the opposite effect that sales amount induces on both channels. We disentangle both effects and show that the assets turnover dominates which suggest that the mission statement compels good assets management practices.

Suggested Citation

  • Diego F. Téllez & Jesús M. Godoy, 2017. "Mission Power and Firm Financial Performance," Documentos de Trabajo de Valor Público 15655, Universidad EAFIT.
    • Handle: RePEc:col:000122:015655
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    File URL: https://repository.eafit.edu.co/handle/10784/11233#.WWjXF9Pyvq0
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    References listed on IDEAS

    as
    1. Tim Loughran & Bill Mcdonald, 2014. "Measuring Readability in Financial Disclosures," Journal of Finance, American Finance Association, vol. 69(4), pages 1643-1671, August.
    2. Pradeep Dharmadasa & Yasantha Maduraapeurma & Siriyama Kanthi Herath, 2012. "Mission statements and company financial performance revisited," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 4(3), pages 314-324.
    3. Gabriel Hawawini & Venkat Subramanian & Paul Verdin, 2003. "Is performance driven by industry‐or firm‐specific factors? A new look at the evidence," Strategic Management Journal, Wiley Blackwell, vol. 24(1), pages 1-16, January.
    4. Sidhu, Jatinder, 2003. "Mission Statements:: Is it Time to Shelve Them?," European Management Journal, Elsevier, vol. 21(4), pages 439-446, August.
    5. Kearney, Colm & Liu, Sha, 2014. "Textual sentiment in finance: A survey of methods and models," International Review of Financial Analysis, Elsevier, vol. 33(C), pages 171-185.
    6. Kewei Hou & David T. Robinson, 2006. "Industry Concentration and Average Stock Returns," Journal of Finance, American Finance Association, vol. 61(4), pages 1927-1956, August.
    7. Tim Loughran & Bill Mcdonald, 2011. "When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks," Journal of Finance, American Finance Association, vol. 66(1), pages 35-65, February.
    8. Bartkus, Barbara & Glassman, Myron & Bruce McAfee, R., 2000. "Mission statements: Are they smoke and mirrors?," Business Horizons, Elsevier, vol. 43(6), pages 23-28.
    9. Braun, Susanne & Wesche, Jenny S & Frey, Dieter & Weisweiler, Silke & Peus, Claudia, 2012. "Effectiveness of mission statements in organizations – A review," Journal of Management & Organization, Cambridge University Press, vol. 18(4), pages 430-444, July.
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    Cited by:

    1. Julian D. Cortes & Diego Tellez & Jesus Godoy, 2021. "Mission Statement Effect on Research and Innovation Performance," Papers 2104.07476, arXiv.org.

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    Keywords

    mission statement; financial performance; word content analysis; structural equation model;
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