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Ali Rasouli, Seyed Mojtaba Mojavarian, Foad Eshghi, Somayeh Shirzadi,
Volume 11, Issue 2 (8-2024)
Volume 11, Issue 2 (8-2024)
Abstract
Extended Abstract
Background: The success or failure of a company is influenced by internal and external factors. The three management components, including the conduct within the organization, the market structure, and the performance of the company, cannot be considered separately from each other. The performance of companies in every industry is influenced by their conduct. On the other hand, the market structure affects both performance and conduct, but the market structure itself is also dependent on the behavior of companies with each other. In this regard, the number of employees and the creation of new businesses strongly depend on the type and intensity of the relationship between these three components. There are three management theories based on the posterior or anterior effects: the theory of structuralisms who believe that the direction of causality is from the structure to conduct and then to performance. In fact, the behavior of companies and their decision based on cooperation, alliance, or competition with each other is affected by the market structure. The structure and behavior of companies in the market collectively shape the market performance of companies. The Chicago theory is the opposite. Contrary to the opinion of structuralisms, they consider the direction of causality from market performance, which is reflected in efficiency, technical progress, profitability rate, amount of production, sales, export, and employment to other elements of the market. In the third theory, the behavior of companies is considered the principle. They consider the behavior pattern of companies as an effective factor in the formation of market performance. Accordingly, the structure is not very effective in the market performance, but the behavior of companies is the basic element that determines the performance. This study aims to measure the effect of employment on the financial performance of sugar companies and to identify the structure-behavior and performance paradigm.
Methods: The information on eight sugar-producing factories, whose shares are bought and sold in the Tehran Stock Market, was collected over four years (2018-2021). According to the available data, Herfindahl index variables, research and development cost, and gross profit were used to measure the components of structure, conduct, and performance, respectively. The variables needed to form the applied models were calculated using the financial statements of sugar factories in different provinces of Iran. The type of ownership of the company, the share of government ownership, and the number of labor forces were used as exogenous variables of the model. The variables were modeled in a panel simultaneous equations system. System estimators (Full Information Maximum Likelihood: FIML) were used to estimate the parameters of the simultaneous equations system.
Results: The results showed that about 1100 workers were active in the production sector of these factories. Among different industries, the sugar industry was relatively labor intensive. On average, the government's share in providing capital was about 40%. However, this is not a suitable criterion for the management role of the private sector because the government periodically assigns tasks to these units. Based on the estimation results, the market structure effect on the conduct was statistically significant, but it did not significantly affect its performance. Moreover, the conduct impact of the company had a significant and positive effect on both the structure and the performance. Performance also showed a positive and significant impact on both components of the industry structure and company conduct. Examining the effect of exogenous variables is also considerable. Companies where the government has more share in financing leave a negative impact on the structure. The relationship between sales value and R&D expenditure became negative, which could be caused by the lack of need for companies in times when their sales are high. Another justification for this result can be the low marketing margin due to the government's price interventions in this industry. The estimation of the effect coefficient of the sales value on gross profit is positive but small. Based on the obtained results, the workforce has not been able to have a significant effect on the company's performance. Although it shows a positive effect on average, this effect is not statistically significant.
Conclusion: The results showed that the performance of the companies differed greatly from each other, but small companies were more successful on average. Each sugar factory has 136 workers on average, although this record cannot be valid due to the seasonal nature of the activity. One of the results of the study is no impact of the labor force on performance from a statistical point of view. Although this input in this industry has not entered the third stage of production and the inverse relationship with production, its effect was not significant on performance. The amount of effects between the three components of structure, conduct, and performance were determined by measuring the average elasticities, and therefore, the theory of structuralisms is closer to the conditions of the Iranian sugar market. According to all the results, it is suggested to reduce government interventions to allow for activating the market mechanism. According to the results of the research, it can be expected that the reduction of government interventions will have a positive effect on the behavior and performance of companies in the long term. Firstly, the use of other indicators that have the ability to explain behavior, performance, and structure, secondly, the estimation of the model in a non-linear way, and thirdly, the use of composite indicators made based on the opinions of experts, which are a better representative of the prevailing situation in Iran's sugar industry, are suggested for future studies.
Background: The success or failure of a company is influenced by internal and external factors. The three management components, including the conduct within the organization, the market structure, and the performance of the company, cannot be considered separately from each other. The performance of companies in every industry is influenced by their conduct. On the other hand, the market structure affects both performance and conduct, but the market structure itself is also dependent on the behavior of companies with each other. In this regard, the number of employees and the creation of new businesses strongly depend on the type and intensity of the relationship between these three components. There are three management theories based on the posterior or anterior effects: the theory of structuralisms who believe that the direction of causality is from the structure to conduct and then to performance. In fact, the behavior of companies and their decision based on cooperation, alliance, or competition with each other is affected by the market structure. The structure and behavior of companies in the market collectively shape the market performance of companies. The Chicago theory is the opposite. Contrary to the opinion of structuralisms, they consider the direction of causality from market performance, which is reflected in efficiency, technical progress, profitability rate, amount of production, sales, export, and employment to other elements of the market. In the third theory, the behavior of companies is considered the principle. They consider the behavior pattern of companies as an effective factor in the formation of market performance. Accordingly, the structure is not very effective in the market performance, but the behavior of companies is the basic element that determines the performance. This study aims to measure the effect of employment on the financial performance of sugar companies and to identify the structure-behavior and performance paradigm.
Methods: The information on eight sugar-producing factories, whose shares are bought and sold in the Tehran Stock Market, was collected over four years (2018-2021). According to the available data, Herfindahl index variables, research and development cost, and gross profit were used to measure the components of structure, conduct, and performance, respectively. The variables needed to form the applied models were calculated using the financial statements of sugar factories in different provinces of Iran. The type of ownership of the company, the share of government ownership, and the number of labor forces were used as exogenous variables of the model. The variables were modeled in a panel simultaneous equations system. System estimators (Full Information Maximum Likelihood: FIML) were used to estimate the parameters of the simultaneous equations system.
Results: The results showed that about 1100 workers were active in the production sector of these factories. Among different industries, the sugar industry was relatively labor intensive. On average, the government's share in providing capital was about 40%. However, this is not a suitable criterion for the management role of the private sector because the government periodically assigns tasks to these units. Based on the estimation results, the market structure effect on the conduct was statistically significant, but it did not significantly affect its performance. Moreover, the conduct impact of the company had a significant and positive effect on both the structure and the performance. Performance also showed a positive and significant impact on both components of the industry structure and company conduct. Examining the effect of exogenous variables is also considerable. Companies where the government has more share in financing leave a negative impact on the structure. The relationship between sales value and R&D expenditure became negative, which could be caused by the lack of need for companies in times when their sales are high. Another justification for this result can be the low marketing margin due to the government's price interventions in this industry. The estimation of the effect coefficient of the sales value on gross profit is positive but small. Based on the obtained results, the workforce has not been able to have a significant effect on the company's performance. Although it shows a positive effect on average, this effect is not statistically significant.
Conclusion: The results showed that the performance of the companies differed greatly from each other, but small companies were more successful on average. Each sugar factory has 136 workers on average, although this record cannot be valid due to the seasonal nature of the activity. One of the results of the study is no impact of the labor force on performance from a statistical point of view. Although this input in this industry has not entered the third stage of production and the inverse relationship with production, its effect was not significant on performance. The amount of effects between the three components of structure, conduct, and performance were determined by measuring the average elasticities, and therefore, the theory of structuralisms is closer to the conditions of the Iranian sugar market. According to all the results, it is suggested to reduce government interventions to allow for activating the market mechanism. According to the results of the research, it can be expected that the reduction of government interventions will have a positive effect on the behavior and performance of companies in the long term. Firstly, the use of other indicators that have the ability to explain behavior, performance, and structure, secondly, the estimation of the model in a non-linear way, and thirdly, the use of composite indicators made based on the opinions of experts, which are a better representative of the prevailing situation in Iran's sugar industry, are suggested for future studies.
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