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Financial Performance, Strategic Change and Industrial Concentration Dynamics in Brazilian Companies

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  • Renato Nogueira Starling
  • Rafael Barreiros Porto

Abstract

The impact a company's change in strategy has on its financial performance is an inconclusive topic in management. This is partially due to a failure to adopt a dynamic perspective. This study investigated the effects of past strategic changes in boards of directors, customers and products (taking into consideration the industrial concentration represented by the number of companies in the sector) on profitability, sales growth and market value of publicly traded companies. We also assessed the impact past performance and industry concentration has on subsequent strategic changes. Using data from 68 companies over ten years, we built up a within-enterprise panel analysis using generalized estimating equations, a technique that considers the temporal autocorrelation of the dependent variable. The results indicated that strategic changes generate short and long-term financial performances and these effects generate subsequent strategic changes, independent of industry concentration. This, in turn, sometimes encourages high financial performance and strategic change, but at other times discourages them. This research contributes to evolutionary causal explanations on the relationship between financial performance and strategic changes.

Suggested Citation

  • Renato Nogueira Starling & Rafael Barreiros Porto, 2014. "Financial Performance, Strategic Change and Industrial Concentration Dynamics in Brazilian Companies," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 18(4), pages 397-415.
    • Handle: RePEc:abg:anprac:v:18:y:2014:i:4:1044
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