Efficiency in Business and Economics

Recently the attention of the scientific community focuses on internal audit and its role in the organization. Previous studies have shown that internal audit does not always achieve their goals, that is why this study sought to understand the factors that affect internal audit effectiveness. Based on the survey from 342 organizations in Poland it was found that the internal audit effectiveness is affected by: (1) the characteristics of the internal audit, (2) audit activity, and (3) inter-organizational relationships. The effectiveness increases when the age of the internal audit grows, performing audit engagements is regularly monitored, the results of measuring the audit performance and self-assessment are employed for introducing changes, audit committee indicates significant risks and sets priorities for the annual and strategic audit plans, and commissioned audits do not exceed 20% of the work of the internal audit.

This paper brings an outline and preliminary results of a 2-year project aiming at assessing the social effectiveness of public policy institutions. The effectiveness of public institutions is an important indicator of the success and prosperity of a country. It is usually measured indirectly via data such as public officer numbers, the quality of legislation regulating the relations between the public administration and its users, and by the satisfaction of the population with the public administration bodies. In this area, the Czech Republic sadly lags behind most developed countries. The authors bring their own concept of social effectiveness, which is inspired mainly by the principles of good public administration, open government, public value, and social and ethical auditing.

This paper examines whether investors use information contained in the prospectus as indicators of firm quality and incorporate this information when pricing an IPO firm, and then it relates these IPO valuations to post-IPO returns. The study is based on a sample of IPO firms that went public on the Warsaw Stock Exchange during the period from 1998 to 2011. We find that a firm’s performance before going public is perceived by investors as an indicator of future performance and it affects IPO valuation. Specifically, our results indicate that high profitability achieved before IPO allows to obtain a high issue price to book value per share ratio. However, our results indicate that the relation between valuation during issuance and profitability gets weaker and ultimately completely disappears after IPO. As a result, 2 years after issuance there are no differences between firms’ performance no matter how high they were valued during IPO. Investors willing to pay a higher price for IPO shares do not achieve extra benefits both in terms of accounting and market rates of return.

A change in the person holding a key managerial position in a company is an important event for the company’s stakeholders, and even more important when the company operates in the continental system of corporate governance and the CEO is the key person responsible for the strategic directions of operations and day to day control of different organizational structures of the enterprise. Based on such premises, in this article we analyze CEO succession in companies quoted on the Warsaw Stock Exchange. The article presents the basic characteristics of 1904 CEO appointments which were made in 2000–2015 and is an introduction to a series of articles which explain this phenomenon from different points of view. It was determined, for example, that in the entire period under analysis, preference was given to the appointment of a new CEO (997) rather than to an extension of the term of office of the existing CEO (850). However, in the last three years a reversed trend can be observed (213/258). It is worth adding that in the actual succession subgroup, supervisory boards prefer to appoint CEOs from among outsiders.

In today’s turbulent and challenging world it is not an organization’s internal research and development activity that is the leading source of innovation, but the organizational environment. As a consequence, transfer of innovative technologies is a tool commonly used to enhance a company’s development. The effectiveness of this undertaking is determined primarily by the technology recipient’s absorptive capacity which is responsible for acquiring strategically valuable technology, its effective assimilation, and using it with desired results in mind. Thus, a company should guarantee the realization of goals it sets for itself when deciding to engage in technology transfer by maintaining a proper perfection level of these specialized abilities.

In this paper, the authors make an attempt to gauge the absorptive potential of finance companies operating in Poland in terms of their efficiency in transferring innovative technologies; all based on a survey. As it turns out, realization of this potential confirmed the assumptions made by the authors, hence it has been concluded that how well developed financial companies’ absorptive capacities are has an actual influence both on direct and indirect effects of innovative pro-technology activities based on external sources, which economically justifies making investments in further development of those absorptive abilities.

This paper presents the main issues of financial microeconometrics. This field can be considered as a part of financial econometrics, while usually not exposed as such. Typical domains of the methodology of financial microeconometrics include research in empirical corporate finance and applied accounting. This survey-like paper argues that financial microeconometrics research shall be also rooted in wider fields like corporate law, management and finance. Various types of research in financial microeconometrics as well as several methodological issues are examined. A major emphasis is placed on questions of endogeneity, sample selection and treatment effects. Observations on financial microeconometrics literature both in Poland and worldwide are also included.

This paper studies the efficiency of the impact of oil price, key interest rate and inflation on the exchange rates in the Russian Federation. The authors researched the effect of oil prices and other economic variables on the currency rate of dollar to ruble. The regression model has accurately shown this interrelation. The impact of macroeconomic variables and close interrelation between the exchange rate of dollar to ruble and oil prices is revealed. Oil price is a dominating factor in a exchange rate mechanism in Russia. When world oil prices are stabilized and sanctions are cancelled, currency fluctuations and uncertainty will be minimized. The monetary policy of Russian Central bank is to become less rigid, but focused on decrease of the inflation rate and on stabilization of national currency rate.

The present article tries to explain how firms appropriate their investments in innovation activities. Thereby, not only intellectual property rights, but also different informal appropriation mechanisms are analysed. The special attention is paid to interactions among various appropriation methods. For the empirical testing, a large dataset is employed. The sample of innovation active firms used in this analysis includes 2960 entities that were engaged in developing and/or implementing a product or process innovation in the years 2010–2012. The results show that firms in the sample indicate high effectiveness of informal appropriation methods while at the same time assessing formal appropriation methods as being of low effectiveness. Moreover, it appears that formal methods vary together. A similar situation holds for informal methods. The findings give evidence that the choice and effectiveness of the appropriation strategies were affected by the firm’s size, the type of innovation and the sector to which firms belonged.

The impact of enterprise value drivers on value migration processes has not been subjected to extensive and detailed empirical analysis, though the literature strongly indicates connections between them. The article presents the relationships between value migration phases and value drivers, using financial data for the Polish capital market in the years 2001–2014. The aim of the article is to verify whether changes in value drivers are behind value migration processes. The paper shows that companies located in different value migration phases have different value levels of value drivers and that value migration processes are accompanied by changes in the companies’ value factors. Companies’ transition from build-to-destroy or destroy-to-build value migration phases are accompanied by a significant change in value drivers, such as sales dynamics, profitability and fixed assets profitability.

The Financial Liquidity Investment Efficiency Model (FLIEM) was presented and discussed by Michalski (Value-based working capital management: determining liquid asset levels in entrepreneurial environments. Palgrave Macmillan, 2014). Here the Cash Levels in Full Operating Cycle (CLFOC) is proposed as a FLIEM remodelling. Some external factors resulting from the economic situation surrounding the enterprise were pointed out in this paper. These factors interact with the operating cycle of the overall firm operational risk which is reflected in the level of cash held. These are so called environmental conditions we should take into account during considering a model of cash holdings in the full operating cycle firm. The aim of the study was to determine the rules governing the modern cash management in small and medium firms with a full operating cycle with a particular emphasis on environmental conditions influencing firms. At the core of the research hypothesis is the belief that the level of cash and cash management policies in the firm in an integrated manner with other elements resulting from the operating cycle, contribute to moderating the risk of the firm and it can be shown using empirical data from enterprises operating effectively in practical business.

The paper aims at presenting a coherent algorithm allowing to evaluate tender bids in accordance with the principles of value-based management. The evaluation of tender results in many cases lacks rigorous methodology and often involves an inherent element of subjectivity. The mathematical models, used to assign weighs to the bid evaluation criteria, may not accurately reflect the outcomes of the valuation prepared as part of the capital budgeting process, which as a consequence, may impair the credibility and objectivity of the company’s procurement policy. The problem is further complicated by the difficulties related to operationalisation of the qualitative evaluation criteria. The paper elaborates on the idea that tender bids should be evaluated based on a unique objective function, i.e., the company value. The algorithm presented in the paper supplemented with an elaborated numerical example, gives a step-by-step guidance in the process of the tender results evaluation and presentation, thereby allowing to minimise possible errors and biases. The model may be of considerable interest to the practicing financial managers, as it accords perfectly with the process and concepts of value-based management, and assures the transparency of the tender procedures.

The experience supported by the analysis of balance sheets and statements shows that the implementation of the effective product portfolio management programme significantly affects the company’s financial effects. Therefore, the research was initiated, and its main objective is an attempt to answer the following question: is there a relationship between a type of the raw material used in the production process of spare parts for agricultural machinery, and—resulting from their implementation—effectiveness? The information obtained as a result of the research implementation—according to the authors’ beliefs—will allow to determine, in which of individual product categories the manufacturer should look for implementation opportunities that constitute product innovations. By carrying out the research, a conceptual thesis model was adopted, namely: The product innovation effectiveness is a derivative of the raw material used in the production process of spare parts for agricultural machinery. In other words, it is possible to categorise products in the relationship between a raw material and implementation effectiveness.

The main aim of the paper is to point out the differences in entrepreneurial environment institutional frameworks between the Visegrad four countries (the Czech Republic, Slovakia, Poland and Hungary—V4) and Finland. The comparison of institutions affecting entrepreneurship was based on creation and analysis of institutional profiles comprising of four pillars essential to understand the emergence of entrepreneurship—regulative, cognitive, normative and conducive dimensions. Our results suggest that entrepreneurial environment in V4 countries substantially differs from that of Finland. V4 countries lack in development of regulative attributes as well as in conducive dimension crucial for innovative entrepreneurship. Subsequently, different quality of environment is reflected in different quality of business activity, and its allocation between independent entrepreneurship and intrapreneurship.

The purpose of this paper is to investigate Efficient Market Hypothesis (EMH) for Visegrad Group. The stock prices have been analyzed for the period between 1995 and 2014 with panel multiple structural breaks unit root test which is developed by Carrion-i-Silvestre et al. (2005). According to the findings, Efficient Market Hypothesis is accepted for Hungary, Poland, Czech and Slovak Republics (for all Visegrad Group). Stock prices have random walk. Due to the importance of monetary policy in equity markets the co-integration between interest rates and stock prices is also examined by the multiple structural breaks co-integration test which is developed by Basher and Westerlund (2009). This test considers the cross-section dependence between individual units. According to the test results; there is co-integration between interest rates and stock prices. Therefore, we could say that monetary policy decisions have an impact on investors’ behaviors.

The paper presents results of a study, which was conducted twice, in the years 2012 and 2014, examining relationships between the solutions adopted within performance measurement systems and financial performance (profit/loss) in Polish companies. In the light of the complexity of performance measurement systems, two approaches were adopted in the study. In the first approach, the focus was on separate and most frequently used individual elements of the system, considered as important. In the second approach, three types of systems were examined; they were created and defined in the process of gradual adding new elements from among those accepted for the study. The association between variables was evaluated with Pearson’s chi-squared test for independence and Tschuprow’s T coefficient.

The results obtained in the study do not provide a conclusive answer as to the association between given solutions adopted within performance measurement systems and financial results reported by companies. This association was found to be significant for selected elements of a performance measurement system in the study carried out in 2014. These elements include: having a strategy incorporating measurable goals, and linking performance measures to the incentive system in the group of companies whose strategies incorporate measures.

The paper presents issues related to the risk of growth failure of SMEs operating in the shadow economy and discusses determinants and paths of business growth. The participation of companies in the shadow economy affects their operations, and thus the processes of their growth. On the one hand, it stimulates the efficiency of companies while, on the other hand, it increases the risk of failure due to the possibility of overestimating the effects of income x through the inclusion of illusory effects in profitability estimation, which results in the emergence of problems in growth management. An analysis of the reasons behind the risk of growth failure of companies operating in the shadow economy was conducted on the basis of 131 Polish SMEs. The research shows that the risk rises with the increase in the share of the shadow economy in the financing of business growth. The risk of growth failure of companies operating in the shadow economy increases due to errors in management resulting from a lack of competencies and experience of entrepreneurs from the SME sector. It does, however, decrease when the use of an anticipatory strategy of growth, but increases when an ad hoc growth strategy is used.

CSR practice may draw inspiration not only from academic inquiries, but also from social debates, goals articulated by political leaders and the experiences of other economic entities that carry out their own social responsibility programmes. This article discusses an issue that has fundamental significance both for the economy’s prospects and in its practical usefulness, as the art of managing in contemporary conditions. The research addresses issues related to Corporate Social Responsibility (CSR) in enterprises operating in the Pomerania Euroregion (The Pomerania Euroregion is a border region of particular significance. It connects German and Polish territory, and since February 1998, Swedish communities as well. In light of its location, the Pomerania Euroregion is a link connecting Central Europe with Eastern Europe and Scandinavia. From the point of view of further European integration, the east-west and north-south connections formed throughout history on the territory of Pomerania are growing in relevance today, making it possible to gradually achieve the EU’s dream of harmonisation of living conditions in the member countries of the Pomerania Euroregion) (Mecklenburg-Vorpommern in Germany and Poland’s Zachodniopomorskie Province). Entities operating in the tourism sector, offering accommodation, are analysed in this publication. The purpose of the article is to present the results of research concerning the implementation of CSR principles in the area of investment in employee development by Polish and German micro, small and medium-sized enterprises in the Pomerania Euroregion and to indicate cultural differences in this sphere and their influence on the employer-employee relationship. Taking as the paper’s starting point the problem’s relationship to investment in employee development, the following research hypothesis was formulated: Inspiring employees to develop their skills and to engage in long-term career planning contributes to the intensification of cooperation in regional relations.

Finding differences in implications of linear and system thinking for outcomes of organizational activity is the main scientific goal of the article. The mental models of managers result from various thinking patterns and impact efficiency of organization. When it comes to achieving short term goals linear thinking is sufficient but there could be addressed questions how and even why should we overcome potential drawbacks of linear thinking? Having the latter in mind we applied both linear and system thinking in solving the practical problem of meeting logistics requirements of customers. We assumed hypothesis that the systems thinking is reflected with proactive adaptation whereas linear thinking manifest itself by reactive adaptation The applied methods encompass the literature review on linear and system thinking and diagnostic action research. The literature review provides the background on differentiating between linear and system thinking whereas diagnostic action research was applied to verify assumed hypothesis. Findings of our study point to interrelations between flexibility and efficiency. Although reactive adaptation stemmed from linear thinking provides quick wins, could result in unintended consequences. The latter translates into inability to adapt in the longer term. We suppose that our work brings also some impulses for thinking on methodology of action research as it outlines differences in approaching towards linear and system thinking; and provide insights on how to consciously drive causal loops in a business environment.

Internal communication is important because it is a tool to manage people. Effective communication and teamwork is essential for the delivery of high quality products or services. Here, effective communication should bring about an effect in efficient work, economical products and frugal organization management. Therefore, there is an assumption that if the communication pattern is adjusted to organization type, internal communication is effective. Two hypothesis were settled in this paper. H1: There is consistency between the communication pattern of superiors (managers) and the communication pattern of subordinates (employees). H2: There is consistency of the communication pattern to organization type for superiors (managers) and subordinates (employees). The conducted research shows partial, a rather low agreement between directors’ (managers’) and employees’ communication, as well as low consistency of organization types and communication patterns. The research leads to a rejection of both hypothesis. Further research is recommended to establish the level of organizational effectiveness of consistent and inconsistent companies (both human and organizational ones).

Independent economic regulation is one of the key preconditions to establish rules of the game enabling and encouraging efficient and fair business. Problematic independence, leading to unfair, unpredictable and politically influenced regulatory decisions, increases costs of compliance with such institutional framework, which negatively influences the overall efficiency of economic activities. The aim of this paper is to discuss the problematic independence of economic regulation, illustrated on a case study on a regulatory office in Slovakia, and to provide concrete suggestions how the independence of economic regulation can be improved in its de jure as well as de facto dimensions. The case study deals with the recent case of Slovakia’s Regulatory Office for Network Industries that in late 2016 and early 2017 served as a good example of problematic independence of economic regulation both from politicians and the business sector. The case highlights the main system deficiencies in all relevant contexts, from legislation through its implementation and enforcement, to political, business and overall culture. Therefore, the case serves as a valuable learning basis, on which we build recommendations for improvements of independence of economic regulation, that are so much needed not only in the national context, but also in the context of most CEE economies.

The paper is focused on the issue of reporting for sustainable development. Two terms—sustainability reporting and integrated reporting, used in relation to reporting for sustainable development, are defined. They are discussed in the context of different, partly conflicting, approaches to business sustainability. It was shown that more and more often reporting frameworks refer to sustainability and sustainable development, but none of them supports a holistic approach to business sustainability (for which the organization has a potential to contribute to sustainable development of the world). Most of reporting standards are the manifestation of the win-win approach to business sustainability (which in reality makes the role of the organization unclear in the sustainable development). Particularly worthy of attention is the GRI’s Framework. It seems to be constructed by the holistic-altruistic values that condition the organizational participation in sustainable development. However, in business practice, this standard is the manifestation of individualistic-egoistic values. The GRI’s Framework shows that there are conditions (other than the reporting standard itself), which have to be investigated. The paper is a part of the current discussion about whether (if any) sustainability and integrated reporting create transparency about organizations’ sustainability commitment.