From words to action: A structural equation modelling analysis on the relationship between mission statements and financial performance

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School of Business | Master's thesis
Degree programme
Management and International Business (MIB)
This thesis investigates the relationship between mission statements and financial performance, aiming to critically examine the extent to which mission statements relate, if at all, to tangible financial outcomes regarding mission power. In this thesis, mission power denotes the capacity of mission statements to fulfil their intended purpose, such as communicating the organization’s purpose and direction. This research topic is of interest to both academia and industry leaders as there is not a consensus on the optimal utilization and measurable effectiveness of mission statements. Structural equation modelling, a comprehensive statistical approach, was employed to quantitatively assess the mission–performance relationship, allowing for the analysis of complex variable relationships. This methodology was used to empirically study how the mission statements of companies listed on the Nasdaq Helsinki stock exchange (N = 66) relate to profitability and asset turnover in terms of mission power. Mission power was examined through measures of readability, tone, and financial focus of mission statements as well as the assets endowed for the realization of these statements. The conducted empirical study did not establish definitive links between mission statements and financial performance. The proposed measurement model of the latent construct mission power was undefined, and thus individual relationships between study variables were further examined. Nevertheless, the individual relationships between mission statement related variables and financial outcomes were found to be insignificant (p > 0.05) likely due to the small sample size and plausible model specification issues. In the study sample, the examined relationships did, however, suggest that there is a trade-off to be made between short-term and long-term financial success, thus highlighting the role of managers in this balancing act. In this thesis, actionable suggestions for future studies are presented on three improvement areas: research design, model specification, and sample size. For instance, the potential role of contextual factors in the investigated relationships is discussed. Notably, the author of this thesis suggests that lexical and culture-specific factors influence the results regarding tone and readability, thus emphasizing the need for more comprehensive investigations.
Thesis advisor
van der Giessen, Mark
management, finance, mission, mission statement, financial performance, structural equation modelling
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