Financial Performance Indicators: A Tool for Assessing Organizational Performance
DOI:
https://doi.org/10.5281/zenodo.21620302Keywords:
Construction organizations, Construction projects, financial performance indicators, poor performance, project management skills.Abstract
The failure of construction projects to be delivered successfully – the root of poor performance in the construction business and organization – is attributed by scholars to the improper financial performance indicators (or no performance indicators at all) of contractors, and subsequently, sub-contractors and suppliers. Therefore, proficient financial performance indicators such as adequate cash flow, profitability, liquidity, and market share are tools required for the delivery of successful construction projects and companies. However, there is limited or no objective research that explores financial performance indicators as a tool to assess project and construction organization performance in South Africa. The study used a research approach involving the collection of qualitative data to achieve the research objective. It emerged from the study that the financial performance indicators used in assessing the financial performance of construction organizations entail profitability, cash flow, liquidity, leverage, and turnover. Based on these findings, the study concludes that the failure of construction projects and organizations will be reduced through the adoption of an effective financial performance indicator tool by construction organizations.
References
Abdullah, N. A. I. N., Ali, M. M., & Haron, N. H. (2017). Ownership structure, firm value and growth opportunities: Malaysian evidence. Journal of Computational and Theoretical Nanoscience, 1, 1–6.
Adjei, E., Fugar, F. D. K., Adinyira, E., Edwards, D. J., & Parn, E. A. (2018). Exploring the significant cash flow factors influencing building projects profitability in Ghana. International Journal of Construction Engineering and Management, 7(1), 35–46.
Ahmad, N., Salman, A., & Shamsi, A. F. (2015). Impact of financial leverage on firm's profitability: An investigation from cement sector of Pakistan. Research Journal of Finance and Accounting, 6(7), 75–80.
Alfan, E., & Zacharia, Z. (2013). Review of financial performance and distress: A case of Malaysian construction companies. British Journal of Arts and Social Sciences, 12(11), 1–15.
Al-Momani, M. A., & Obeidat, M. I. (2017). Towards more understanding of the financial leverage controversy: The evidence of the industrial firms at Amman stock exchange. International Journal of Economics and Financial Issues, 7(4), 189–198.
Alonso, P. D. A., Iturriaga, F. J. L., & Sanz, J. A. R. (2005). Financial decisions and growth opportunities: A Spanish firms panel data analysis. Applied Financial Economics, 15(6), 391–407.
Ammer, C., Fagus, S. L., & Quercus, R. L. (2003). Growth and biomass partitioning of seedlings in response to shading and small changes in the R/FR-ratio of radiation. Forest Science, 60(1), 163–171.
Arafat, H., & Skaik, S. (2016). How can contractors warrant timely payments in the UAE construction industry. In B. C. George (Ed.), The construction, building and real estate research conference of the Royal Institution of Chartered Surveyors. Toronto, Canada.
Armstrong, M. (2006). A handbook of human resource management practice (10th ed.). Kogan Page.
Begley, T. M. (1995). Using founder status, age of firm, and company growth rate as the basis for distinguishing entrepreneurs from managers of smaller businesses. Journal of Business Venturing, 10(3), 249–263.
Blaxter, L., Hughes, C., & Tight, M. (2006). How to research (3rd ed.). Open University Press.
Brennan, M. J., Chordia, T., Subrahmanyam, A., & Tong, Q. (2012). Sell-order liquidity and the cross-section of expected stock returns. Journal of Financial Economics, 105(3), 523–541.
Buzzell, R. D. (2004). The PIMS program of strategic research: A retrospective appraisal. Journal of Business Research, 57(1), 478–483.
Construction Industry Development Board. (2016). Construction industry transformation plan (2016–2020). https://www.citp.my
Donaldson, G. (1984). Managing corporate wealth. Praeger.
Egbide, B. C., Uwuigbe, O., & Uwuigbe, U. (2013). Liquidity management and profitability of manufacturing companies in Nigeria. IOSR Journal of Business and Management, 9(1), 13–21.
Ekpenyong, D. B., & Nyong, M. O. (1992). Small and medium scale enterprises in Nigeria: Their characteristics, problems and sources of finance (Research Paper No. 16). African Economic Research Consortium. https://www.africaportal.org
Etale, L. M., Bingilar, P. F., & Ifureze, M. S. (2016). Market share and profitability relationship: A study of the banking sector in Nigeria. International Journal of Business, Economics and Management, 3(8), 103–112.
European Commission. (2015). Enterprises and industry: SME definition. http://europa.eu.int/comm/enterprise/enterprisepolicy/smedefinition/index.htm
Gill, A., & Mathur, N. (2011). Factors that influence financial leverage of Canadian firms. Journal of Applied Finance and Banking, 1(2), 19–37.
Gschwandtner, A. (2005). Profit persistence in the 'very' long run: Evidence from survivors and exiters. Applied Economics, 37(7), 793–806.
Hai, N. L., & Watanabe, T. (2014). The status quo and perspective for improvement of public works procurement performance in Vietnam. Journal of Advanced Performance Information and Value, 6, 22–39.
Harris, C., Roark, S., & Zhe, L. (2019). Cash flow volatility and trade credit in Asia. International Journal of Managerial Finance, 15(2), 257–271.
Haupt, T. C., & Padayachee, K. (2016). Financial management capacity and business failure of contractors. In 10th ASOCSA Built Environment Conference (pp. 213–226). Port Elizabeth, South Africa.
Hermi, H. (2004). Hubungan laba bersih dan arus kas operasi terhadap dividen kas pada perusahaan perdagangan besar barang produksi di bursa efek Jakarta pada periode 1999–2002 [The relationship of net income and operating cash flow to cash dividends in large trading companies on the Jakarta stock exchange, 1999–2002]. Media Riset Akuntansi, Auditing, dan Informasi, 4(3), 247–258.
Idowu, A., Winston, S., Emmanuel, D. O., & Williams, D. (2021). Reaction of poor materials management on project delay in the construction industry. International Journal of Advanced Studies in Economics and Public Sector Management, 9(1), 115–124.
Ilori, J. O., & Omopariola, E. D. (2018). Analysis of time performance of indigenous contractors in Kwara State, Nigeria. The International Journal of Engineering and Science, 7(10), 79–86.
Khantimirov, D. (2017). Market share as a measure of performance: Conceptual issues and financial accountability for marketing activities within a firm. Journal of Research in Marketing, 7(3), 587–592.
Lai, H. Y., Aziz, A. R. A., & Chan, T. K. (2014). Effect of the global financial crisis on the financial performance of public listed construction companies in Malaysia. Journal of Financial Management of Property and Construction, 19(3), 246–263.
Love, P. E. D., Smith, J., & Regan, M. (2007). Financing of public private partnerships: Six Australian motorway case study projects.
Lowe, J. G., & Moroke, E. (2010). Insolvency in the UK construction sector. In C. Egbu (Ed.), Proceedings of the 26th Annual ARCOM Conference (pp. 93–100). Association of Researchers in Construction Management.
Martin-Reyna, J. M. S., & Durán-Encalada, J. A. (2012). Ownership structure, firm value and investment opportunities set: Evidence from Mexican firms. Journal of Entrepreneurship, Management and Innovation, 8(3), 35–57.
Mazzoli, M. (2014). Governance, organisational design, financial structure and investments in co-operative firm. In T. Mazzarol, S. Reboud, E. M. Limnios, & D. Clark (Eds.), Research handbook on sustainable co-operative enterprise: Case studies of organisational resilience in the co-operative business model (pp. 381–410). Edward Elgar.
McGahan, A., & Porter, M. E. (1997). How much does industry matter, really? Strategic Management Journal, 18(Summer Special Issue), 15–30.
Miller, P. G., Johnston, J., & Dunn, M. (2010). Comparing probability and non-probability sampling methods in Ecstasy research: Implications for the internet as a research tool. Substance Use & Misuse, 45(3), 437–450.
Moel, J. (2014). Factors affecting firm value: Theoretical study on public manufacturing firms in Indonesia. South East Asia Journal of Contemporary Business, Economics and Law, 5(2), 6–15.
Moghadam, M. D., & Jafari, M. (2015). The role of financial leverage in the performance of companies listed in stock exchange. Indian Journal of Natural Sciences, 5(30), 7402–7411.
Moneva, J. M., & Ortas, E. (2010). Corporate environmental and financial performance: A multivariate approach. Industrial Management & Data Systems, 110(2), 193–210.
Musah, A., Gakpetor, E. D., & Pomaa, P. (2018). Financial management practices, firm growth and profitability of small and medium scale enterprises (SMEs). Information Management and Business Review, 10(3), 25–37.
Norris, W. E. (1990). Margin of profit: Teamwork. Journal of Management in Engineering, 6(1), 20–28.
Odediran, S. J., & Windapo, A. O. (2016). Financial performance of multinational construction companies in South Africa. In 9th cidb Postgraduate Conference (pp. 92–101). Cape Town, South Africa.
Oke, A. E., Ogungbile, A., Oyewobi, L., & Tengan, C. (2016). Economic development as a function of construction project performance. Journal of Construction Project Management and Innovation, 6(2), 1447–1459.
Olugboyega, O., Ejohwomu, O., Omopariola, E. D., & Omoregie, A. (2023). Project leadership functions and the associated behaviour for projects and project organisations. Buildings, 13(7), Article 1739. https://doi.org/10.3390/buildings13071739
Olugboyega, O., Ejohwomu, O., Omopariola, E. D., & Omoregie, A. (2024). Leadership energy theory for sustaining leadership competence and effectiveness. Merits, 4(2), 191–210. https://doi.org/10.3390/merits4020014
Omopariola, E. D. (2025). Harnessing digital informal learning for quantity surveying student development. Futurity Proceedings, (4), 174–184.
Omopariola, E. D., & Windapo, A. O. (2018, September 26–28). Impact of payment systems on construction projects and organization performance [Conference paper]. 42nd AUBEA Conference, Singapore.
Omopariola, E. D., & Windapo, A. O. (2019). Domino effect of advance payment on project cash flow and organisation performance. In C. Gorse & C. J. Neilson (Eds.), Proceedings of the 35th Annual ARCOM Conference (pp. 619–628). Association of Researchers in Construction Management.
Omopariola, E. D., Olugboyega, O., Windapo, A. O., & Albert, I. (2022). Establishing the cost and time performances of projects executed by South African construction companies using different payment systems.
Omopariola, E. D., Olugboyega, O., Windapo, A. O., Edwards, D. J., & Ejohwomu, O. A. (2025). Modelling the interactions between project payment systems, financial management strategies, and construction companies' performance. International Journal of Business Performance Management, 26(5), 634–659.
Oshungade, O. O., & Kruger, D. (2017). A comparative study of causes and effects of project delays and disruptions in construction projects in the South African construction industry. Journal of Construction Engineering and Project Management, 7(1), 13–25.
Owolabi, A. O., Chan, A. A., & Ogunlana, A. A. (2014). Root causes of construction project delays in Singapore. Journal of Construction Management, 4(1), 19–31.
Panayiotis, G. A. (2018). Liquidity as an asset pricing factor in the UK. Journal of Financial Management, 6(2), 185000081–185000824.
Panigrahi, A. K. (2014). Relationship of working capital with liquidity, profitability and solvency: A case study of ACC Limited. Asian Journal of Management Research, 4(2), 308–322.
Papavassiliou, V. G. (2013). A new method for estimating liquidity risk: Insights from a liquidity adjusted CAPM framework. Journal of International Financial Markets, Institutions and Money, 24, 184–197.
Pearce, J. A., & Robinson, R. B. (2003). Strategic management. McGraw-Hill/Irwin.
Pervan, M., & Visic, J. (2012). Influence of firm size on its business success. Croatian Operational Research Review, 3(1), 213–223.
Phua, F. T. T. (2006). Predicting construction firm performance: An empirical assessment of the differential impact between industry and firm-specific factors. Construction Management and Economics, 24(3), 309–320.
Porter, M. E. (1979). The structure within industries and company performance. Review of Economics and Statistics, 61(2), 214–227.
RICS. (2014). Quantity surveying and construction standards: Cash flow forecasting. http://www.isurv.com/site/scripts/documents.aspx
Smith, T. (1983). On the validity of inference from non-random samples. Journal of the Royal Statistical Society, 146, 394–403.
Soetanto, R., Proverbs, D. G., & Holt, G. D. (2001). Achieving quality construction projects based on harmonious working relationships—Clients' and architects' perceptions of contractor performance. International Journal of Quality and Reliability Management, 18(5), 528–548.
Sparker, A. (2005). Narrative analysis: Exploring the whats and hows of personal stories. In I. Holloway (Ed.), Qualitative research in health care (pp. 191–208). Open University Press.
Summers, B., & Wilson, N. (2002). An empirical investigation of trade credit demand. International Journal of the Economics of Business, 9(2), 257–270.
Tran, T., Ha, X., Le, T., & Nguyen, N. (2019). Factors affecting IFRS adoption in listed companies: Evidence from Vietnam. Management Science Letters, 9(13), 2169–2180.
Tucker, G. C., Windapo, A., & Cattel, K. (2015). Exploring the use of financial capacity as a predictor of construction company corporate performance: Evidence from South Africa. Journal of Engineering, Design and Technology, 13(4), 1–18.
Wang, G., Dou, W., Zhu, W., & Zhou, N. (2015). The effects of firm capabilities on external collaboration and performance: The moderating role of market turbulence. Journal of Business Research, 68, 1928–1936.
Downloads
Published
Issue
Section
License
Copyright (c) 2026 Emmanuel Dele Omopariola
This work is licensed under a Creative Commons Attribution 4.0 International License.