Figure 1.
Descriptive variables
| Abbreviation | Variable | Measure | Source |
|---|---|---|---|
| Dependent variables | |||
| ROA | Return on Assets | Net Profit | Company Financial Statements, StockAnalysis |
| ROE | Return on Equity | Net Profit | Company Financial Statements, StockAnalysis |
| Independent variables | |||
| NPS | Customer Obsession Index | NPS value is calculated as: % Promoters | Company official website, Company annual reports, Industry Reports (Customer Gauge NPS Benchmarks; Qualtrics Institute) |
| INNO | Innovation Intensity | R&D expense | Company Financial Statements, StockAnalysis |
| SQ | Service Quality | Binary variable, taking the value of 1 if the company has won at least one award related to service, product quality, or innovation in year t, and taking 0 if it has not won any awards. | Company official website, Company presses release, The Taipei Times |
Summary of tests
| Tests | ROA | ROE |
|---|---|---|
| F-test: OLS vs FEM | F (44,214) = 16.39, Prob = 0.000 | F (44,214) = 11.40, Prob = 0.000 |
| LM-test: OLS vs REM | chibar2 = 310.45, Prob = 0.000 | chibar2 = 241.91, Prob = 0.000 |
| Hausman test: FEM vs REM | Chi2(5) = 41.55, Prob = 0.000 → FEM | Chi2(5) = 5.86, Prob = 0.320 → REM |
| Heteroskedasticity test | Prob = 0.000 | Prob = 0.000 |
| Autocorrelation test | F (1,44) = 52.480, Prob = 0.000 | F (1,44) = 25.797, Prob = 0.000 |
The VIF test result
| Variable | VIF | 1/VIF |
|---|---|---|
| LnRD | 4.63 | 0.215 |
| LnTR | 3.64 | 0.274 |
| NPS | 1.83 | 0.547 |
| INNO | 1.53 | 0.652 |
| SQ | 1.19 | 0.843 |
| Mean VIF | 2.56 | |
Group sample
| Group | Sample |
|---|---|
| Semiconductors | 13 listed companies x 6 years = 78 observations |
| Telecommunications | 10 listed companies x 6 years = 60 observations |
| Aviation | 5 listed companies x 6 years = 30 observations |
| Food | 10 listed companies x 6 years = 60 observations |
| Pharmaceutical | 12 listed companies x 6 years = 72 observations |
The importance of variables
| Ranking | ROA | ROE |
|---|---|---|
| 1 | Innovation | Innovation |
| 2 | LnRD | LnRD |
| 3 | LnTR | LnTR |
| 4 | SQ | SQ |
| 5 | NPS | NPS |
FGLS model results
| Variable | ROA | ROE |
|---|---|---|
| NPS | 0.010* | -0.0005 |
| LnRD | 0.595*** | 1.629*** |
| LnTR | 0.456*** | 1.279*** |
| INNO | -5.880*** | -11.73*** |
| SQ | -0.136** | -0.527*** |
| _cons | -0.811 | -3.310*** |
Comparison between hypotheses and empirical findings
| Hypothesis | Empirical findings | Level of support |
|---|---|---|
| H1. Customer Obsession has a positive impact on ROA and ROE. | Weak positive effect on ROA; insignificant effect on ROE | Partially supported |
| H2. Innovation has a positive impact on ROA and ROE in the long-term. | Significant negative short-term effect on both ROA and ROE | Not supported (short-term) |
| H3. Service Quality has a positive impact on ROA and ROE. | Significant negative short-term effect on both ROA and ROE | Not supported (short-term) |
The Correlation result
| Variable | ROA | ROE | NPS | LnRD | LnTR | INNO | SQ |
|---|---|---|---|---|---|---|---|
| ROA | 1.000 | ||||||
| ROE | 0.944* | 1.000 | |||||
| NPS | 0.505* | 0.530* | 1.000 | ||||
| LnRD | 0.690* | 0.718* | 0.668* | 1.000 | |||
| LnTR | 0.752* | 0.791* | 0.460* | 0.775* | 1.000 | ||
| INNO | -0.322* | -0.240* | 0.002 | 0.186* | -0.189* | 1.000 | |
| SQ | 0.315* | 0.277* | 0.227* | 0.368* | 0.292* | -0.041 | 1.000 |
Descriptive Statistic
| Variable | Obs | Mean | Std. dev. | Min | Max |
|---|---|---|---|---|---|
| ROA | 264 | 7.792 | 2.962 | -4.246 | 15.869 |
| ROE | 264 | 18.515 | 7.883 | -6.388 | 39.198 |
| NPS | 300 | 46.838 | 12.495 | 12.000 | 74.760 |
| INNO | 300 | 0.072 | 0.162 | 0.000 | 1.939 |
| SQ | 300 | 0.446 | 0.497 | 0.000 | 1.000 |
| LnRD | 264 | 6.439 | 2.430 | 1.403 | 12.383 |
| LnTR | 300 | 9.945 | 2.149 | 5.498 | 15.820 |