Leveraging Financial and Non-financial Strategies for Shareholder Value Growth: A Study of Selected Hotels in Zimbabwe

Ngwenya Bongani^1,

¹Faculty of Business, Solusi University, Bulawayo, Zimbabwe

Cite this paper:
Ngwenya Bongani. Leveraging Financial and Non-financial Strategies for Shareholder Value Growth: A Study of Selected Hotels in Zimbabwe. Journal of Finance and Economics. 2013; 1(2):22-32. doi: 10.12691/jfe-1-2-2

Abstract

This study used a combination of quantitative and qualitative designs so as to gain a deeper insight on strategies used to achieve performance goals (shareholder value growth) in selected hotels in Zimbabwe. A self administered questionnaire was used to gather primary research data which was analyzed by the Statistical Package of Social Sciences (SPSS). The research findings were that all hotels use the financial, customer satisfaction, internal business processes, and innovation and learning strategies in order to achieve shareholder value growth. Apart from customer satisfaction, in which Hotel Group 3 recorded the highest mean of 4.5714 and Hotel Group 4 the lowest mean of 3.6667, the research has proved that generally all hotels apply the financial ad non-financial strategies in the same measure. The PE ratio was perceived to have performed superior with a mean of 3.7333 and standard deviation of 1.07146. EPS and dividend yield ratios also performed well with means of 3.7167 and 3.6500 respectively and standard deviations of 1.02662 and 1.03866 respectively. EPS is mostly driven by internal business process strategy as indicated by a significant correlation of .689 and to a lesser extent by financial strategy which had a correlation of .413. PE ratio had a significant correlation of .599 with internal business process strategy and a weaker correlation of .313 was recorded in financial strategy. Dividend yield growth, on the other hand, recorded a strong correlation of .553 with customer satisfaction strategy and a weaker correlation of .460 was noted with innovation and learning strategy. On the whole, the strongest correlation was found to be with internal business process strategy with an average mean of .611, followed by customer satisfaction strategy with a mean of .567, innovation and learning strategy .499 and finally financial strategy with the least average correlation of .407. EPS was affected by international business process strategy (46.5%) and customer satisfaction strategy (10.3%). Internal business process strategy had a 34.8% effect on PE ratio growth and dividend yield growth was affected by two factors, customer satisfaction strategy and financial strategy which contributed 29.4% and 12.2% respectively. The study revealed that, there is a relationship between hotel performance and strategies employed. Internal business process and customer satisfaction strategy had a bearing on the performance of the Earnings per Share (EPS), while dividend yield growth ratio was affected by customer satisfaction and financial strategies. On the other hand the Price Earnings ratio (PE) was affected by one factor only: internal business process strategy. Overall, internal business process strategy has been proven to have the strongest relationship while financial strategy has the weakest relationship.

Keywords:
shareholder value growth earnings per share financial strategies non-financial strategies price-earnings ratio share price

This work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

Figures

References:

[1]	Cooper, D. R, and Schindler, P. S, “Business Research Methods”, 8th Edition, Tata McGraw-Hill, 2005.
[2]	Muchapondwa, E and Pimhidzai, O, “Modeling International Tourism Demand for Zimbabwe”, International Journal of Business and Social Science, Volume, 2(2), 71-8, 2011.
[3]	Cooper, D. R, Schindler, P. S, “Business Research Methods”, 8th edition, Tata McGraw-Hill Publishing Company, 2005.
[4]	Mbaiwa, J. E, “The Socio-Economic and Environmental Impacts of Tourism Development on the Okavango Delta, North-Western Botswana”, Journal of Arid Environments, Volume, 54, 447-467, 2003.
[5]	Atrill, P, “Financial Management for Decision Makers”, 5th edition, Pearson Education, 2009.
[6]	Christie, I. T, and Crompton, D. E, “Tourism in Africa: Africa Region Working Paper Series”, World Bank, Washington DC, 2001.
[7]	Sundaram, A. K., and Inkpen, A. C, “The Corporate Objective Revisited”, Organisation Science, Volume, 15(3), 350-363, 2004.
[8]	Artley, W, and “The Performance-Based Management”, Handbook: Establishing an Integrated Performance Measurement System, Volume 2, University of California, 2005.
[9]	Copeland et al., “Valuation: Measuring and Managing the Value of Companies”, John Wiley & Sons Inc, 2000.
[10]	Boaz Ronen, Z. L and Nitza, G, “Value Focused Management (VFM): Capitalizing on the Potential of Managerial Value Drivers”, IOS Press, 149-151, 2007.
[11]	Awoniyi, S. A., Aderanti, R. A and Tayo, A. S, “Introduction to Research Methods”, Ababa Press Limited, 2011.
[12]	Amit, R and Zott, C, “Value Creation in E-Business’, Strategic Management Journal, Volume 22 (6/7), 493-520, 2001.
[13]	Nieuwenhuizen, C, “Business Management for Entrepreneurs’, Juta & Co, Cape Town, 2007.
[14]	Babbie, E “The Practice of Social Research’, 12th edition. Canada, Wadsworth Publishing, 2009.
[15]	Aaker, K and Day, R “Marketing Research”, 7th Edition, John Wiley & Sons, NY, 2001.
[16]	Anne A, Geert S, and Werner, B “Value Based Management: An Integrated Approach to Value Creation”, Vlerick Leuven Gent Management School, 2002.
[17]	Breakwell, G. M, Hammond, S and Fife-Schaw, C, “Research Methods in Psychology”, 2nd edition, SAGE Publications, 2004.
[18]	Shulver, M, Lawrie, G, and Andersen, H, “A Process for Developing Strategically Relevant Measures of Intellectual Capital”, Proceedings, 2nd International Conference on Performance Measurement, Cambridge, UK, 2000.
[19]	Bourne, M, Hudson, M, Lean, J and Smart, P, “Only Just Managing – No Time to Measure’, Neely, A. (ed.), Performance Measurement: Past, Present and Future, University of Cambridge: Bedfordshire, Cranfield School of Management, 243-250, 2000.
[20]	Saunders, M, Lewis, P and Thornhill, A, “Research Methods for Business Students’, Prentice Hall, London, 2007.
[21]	Stern, J. M, and Shiely, J. S, “The EVA ® Challenge”, John Wiley & Sons, New York, NY (2001),
[22]	Correia, C, Flynn, D, Uliana, E and Wormold, M, “Financial Management”, 4th edition, Juta & co. Ltd, South Africa, 2000.
[23]	Steven, M and Tony, T, “Organisational Behaviour on the Pacific Rim”, McGraw-Hill Pty Ltd, Australia, 2003.
[24]	Swink, M, Melnyk, S. A, Cooper, M. B, and Hartley, J. L, “Managing Operations Across the Supply Chain”, McGraw-Hill Irwin, 2011.
[25]	Cresswell, J. C, “Research Design, Qualitative, Quantitative, and Mixed Methods Approaches”, 2nd edition, Thousand Oaks, Sage Publications, New Delhi, 2003.
[26]	Brealey, R. A, Myers, S. C, and Marcus, A. J, “Fundamentals of Corporate Finance”, 3rd edition, McGraw-Hill Companies, Inc, 2001.
[27]	Ulwick, A. W, “Turning Customer Input into Innovation”, Havard Business Review, Volume 8(1), 91-97, 2001.
[28]	David, S.Y and Stephen F, and O’Byrne, E “Value-Based Management; A Practical Guide to Implementation”, McGraw-Hill, 2000 as quoted in www.getabstract.com, 2003.
[29]	United Nations World Tourism Organisation (UNWTO), “Tourism Trends”, 2005 Edition, UNWTO, New York, 2006.
[30]	Williams, J, Haha, S, Bettner, M, and Carcello, J, “Financial and Managerial Accounting: The Basis for Business Decisions”, 15th edition, McGraw-Hill, Irwin, 2010.
[31]	Charles W. L. H and Gareth R. J, “Strategic Management”, Houghton Mifflin, 2001.
[32]	Chenhall, R. H and Chapman, C, “Theorising and Testing Fit in Contingency Research on Management Control Systems”, In Hoque, Z. (ed.), and Methodological Issues in Accounting Research: Theories and Methods, Spiramus, London, 2006.
[33]	Wood, F and Sangster, A, “Business Accounting 2”, Pearson Educational Limited, UK, 2005.
[34]	Brealey, R. A., Myers, S. C, Allen, F, and Mohanty, P, “Principles of Corporate Finance”, 8th edition, Tata McGraw-Hill Publishing Company Limited, 2007.
[35]	Bates, R. G, Dempster, M. A. H, Go, H. G and Yong, Y. S, “Prospective Earnings per Share”, University of Cambridge, WP 06/2004, 2004.
[36]	Zikmund, W. G and Babin, B. J, “Essentials of Marketing Research”, 3rd edition, Thompson South-Western, 2007.
[37]	Reisinger, H, Cravens, K. S and Tell, N, “Prioritizing Performance Measures Within the Balanced Scorecard Performance Framework”, Management International Review, Volume 43(4), 429-437, 2003.
[38]	Roseline, T, Karambakuwa, T, Shonhiwa, L, Murombo, F. N, Mauchi, N, Gopo, R. W, Denhere, F, Tafirei, A and Victoria, M, “The Impact of Zimbabwe Tourism Authority Initiatives on Tourist Arrivals in Zimbabwe (2008 – 2009)”, Journal of Sustainable Development in Africa, Volume 13(6), 2011.
[39]	Denzil, W, Antony, H, “Corporate Finance Principles and Practice”, Pearson Education Limited, Prentice Hall, 3rd Edition, 2004.
[40]	Rosenthal, R and Rosnow, R. L, “Essentials of Business Research: Methods and Data Analysis”, 3rd Edition, McGraw-Hill, NY, 2008.
[41]	Bender, R and Ward, K, “Corporate Financial Strategy”, 3rd Edition, 2008.
[42]	Estrada, J “Adjusting P/E ratios by growth and risk: the PERG ratio”, International Journal of Managerial Finance, Volume 1(3), 187-20, 2005.
[43]	Henri, J, “Organisational Culture and Performance Measurement Systems”, Accounting, Organisation & Society, Volume 31, 77-103, 2006.
[44]	Gomes, C, Mahmoud, Y. M and Lisboa, J “An Examination of Manufacturing Organisations, Performance Evaluation: Analysis, Implications and a Framework for Future Research”, International Journal of Operations and Production Management, Volume 24(5), 488-513, 2004.
[45]	Zikmund, W. G, “Business Research Methods”, 7th edition, Thomson South-Western, Ohio, 2003.
[46]	Chong, H. G, “Measuring Performance of Small and Medium-Sized Enterprises: The Grounded Theory Approach”, Journal of Business and Public Affairs, Volume 2, (1), 2008.
[47]	Morse, J. M, Barrett, M, Mayan, M, Olson, K and Spiers, J, “Verification Strategies for Establishing Reliability and Validity in Qualitative Research”, International Journal of Qualitative Methods, Volume 1(2), 13-22, 2002.
[48]	Franklin, A, “Econometrics”, Oxford Review of Economic Policy, Volume 21(2), 2005.
[49]	Mouton, J, “How to succeed in your Master’s & Doctoral studies”, Van Schaik Publishers, Pretoria, 2001.
[50]	Otley, D. T, “Management Control and Performance Management: Whence and Whither?” British Accounting Review, Volume 35, 309-326, 2003.
[51]	Mitchell, M. L, and Jolley, J. M, “Research Design Explained”, 6th edition, Belmont, CA: Thomson Wadsworth, 2007.
[52]	Olve, N, Roy, J and Wetter, M, “Performance Drivers: A Practical Guide to Using the Balanced Scorecard”, John Wiley & Sons, NY, 2001.
[53]	Ittner, C. D and Larcker, D. F, “Assessing Empirical Research in Managerial Accounting: A Value Based Management Perspective”, Journal of Accounting and Economics, Volume 32 (1-3), 349-410, 2001.
[54]	Hoque, Z. A, “Contingency Model of the Association between Strategy, Environmental Uncertainty and Performance Measurement: Impact on Organisational Performance”, International Business Review, Volume 13, 77-103, 2004.