Business strategy and strategic deviation in accounting, finance, and corporate governance: A review of the empirical literature

Abstract

We review the empirical archival literature on the consequences of business strategy and strategic deviation on accounting, finance, and corporate governance outcomes. We use Miles and Snow's (Organizational strategy, structure, and process. McGraw‐Hill, 1978; Organizational strategy, structure and process. Stanford University Press, 2003) strategy typology that has been quantified using financial statement data by Bentley et al. (Contemporary Accounting Research, 2013, 30, 780). Research has used this strategy score to investigate the consequences of firms following two distinct strategies namely, prospectors versus defenders, on various organisational outcomes. Our survey provides mixed evidence on the relationship between business strategy, financial reporting quality, finance outcomes, and corporate governance including corporate social responsibility (CSR) activities. We offer some suggestions for future research.

How does strategic deviation affect firm performance? The roles of financing constraints and institutional investors

“…The existing literature does not provide a unanimous agreement on the economic outcomes of the SD. Aiming to address this research gap, this study distinguishes firm performance into financial performance and market performance since previous research has predominantly concentrated on the influence of SD on financial indicators, overlooking its effect on long-term development and market competitiveness (Habib et al. , 2023).…”

“…The existing literature does not provide a unanimous agreement on the economic outcomes of the SD. Aiming to address this research gap, this study distinguishes firm performance into financial performance and market performance since previous research has predominantly concentrated on the influence of SD on financial indicators, overlooking its effect on longterm development and market competitiveness (Habib et al, 2023). The current research emphasizes the importance of market performance because it reflects external expectations for a firm's long-term development and represents its long-term value (Li et al, 2010;Bennouri et al, 2018).…”

“…, 2020). Previous literature exploring the economic consequences of the SD has primarily focused on short-term financial indicators and has reached predominantly negative conclusions, lacking research on market performance indicators that reflect external investor expectations (Habib et al. , 2023).…”

Strategic Transition to Sustainability: A Cybernetic Model

“…The orientation towards sustainability must be included in the university's/HEI's vision and business policy (e.g., mission and core objectives), in line with the findings of the interdependence between integral governance and management with sustainability (Section 2.2); sustainability orientations must also be included in the core development and business differentiation strategies [1,7,10,102,103]. As the strategic orientations are the starting point for the university's/HEI's tactical and operational decisions and the implementation of its services, sustainability will be embedded in all the aspects of the university's/HEI's business processes.…”

Strategic Deviation and Corporate Tax Avoidance: A Risk Management Perspective

“…Strategic deviation makes it more difficult for shareholders to compare the performance of the deviant firms with industry norms (Carpenter 2000;Litov et al 2012), resulting in an increase in information processing costs and creating information asymmetry between managers and shareholders (Habib et al 2023). Furthermore, strategic deviation involves venturing into uncharted territory or adopting unconventional strategies, which creates difficulties in predicting outcomes, and there is a higher risk of encountering unforeseen obstacles or failures (Carpenter 2000;Deephouse 1999;Litov et al 2012).…”