Balance Sheet Rules and their Influence on Business Performance – An Empirical Study

71 ACC JOURNAL 2022, Volume 28, Issue 2 DOI: 10.15240/ ul/004/2022-2-006 BALANCE SHEET RULES AND THEIR INFLUENCE ON BUSINESS PERFORMANCE – AN EMPIRICAL STUDY Ma a Nosko á1; Pe a Taušl P ocházko á2; E a Jelínko á3 Uni e si y o Wes Bohemia, Facul y o Economics, Depa men o Business Adminis a ion and Managemen , Uni e zi ní 22, 306 14 Plzeň, Czech Republic e-mail: 1[email p o ec ed]; 2pp [email protected]; 3[email p o ec ed] Abs ac The s udy aims o examine in de ail he impac o compliance wi h balance shee ules on business pe o mance. To examine his p emise, da a om small and mic o businesses in he Czech Republic ( o al numbe 2,537) we e s a is ically es ed using - es and Mann-Whi ney U es . Pa icula a en ion was paid o he alue o he e u n on equi y indica o (as a business pe o mance indica o ), and he changes in his alue be ween he business g oups ha comply and hose ha do no comply wi h hese ules. The esul s sugges ha he posi i e e ec o balance shee ule compliance on business pe o mance canno be con i med, no he p edominan compliance among businesses was p o en. Thus, he discussion o whe he he balance shee ules need egula ly appea in he cu en business economics li e a u e should be open. The esul s a e p esen ed and discussed in his pape , oge he wi h hei limi a ions. Keywo ds Balance shee ules; Business pe o mance; Business pe o mance measu emen ; Impac . In oduc ion Balance shee ules a e unde s ood as a well-known pa o he business economy heo y. They p esen ecommenda ions on how o manage balance and s abili y in inancing. Such ecommenda ions a e s ill common in Ge man-speaking coun ies, as well as in he Czech Republic o Slo akia. By ollowing hese ules, businesses should achie e long- e m inancial s abili y due o he speci ic s uc u e o asse s and liabili ies. Balance shee ules a e commonly unde s ood as one o he ools o inancial analysis. Financial analysis is conduc ed mainly o ob ain in o ma ion abou a company’s inancial managemen and, hus, o suppo he s abiliza ion o he company’s inancial heal h. Financial analysis esul s can in luence companies’ inancial s a egies and, hus, hei business compe i i eness. Despi e i s impo ance, limi ed a en ion is paid o he compliance o business shee ules wi hin companies’ inancial s a egies. As López Salaza e al. [1] a gue, inancial analysis and i s pa s ep esen basic ea u es ha suppo company s a egy. Howe e , hey poin ou ha li le a en ion has been paid o mic o and small companies. They a gue ha mic o and small businesses use a limi ed scope o inancial in o ma ion o make decisions, and he p io i y is o en gi en o ope a ing ac i i ies, no o de eloping inancial plans. None heless, he impo ance o inancial decisions is clea , and i s managemen con ibu es o he ailu e o g ow h o a company. The concep o balance shee ules o igina es om Ge man-speaking coun ies [2], [3], [4], [5] and is ela ed o s eams in he business economy known as ‘Be iebswi scha sleh e’. As such, logically, hese ecommenda ions a e s ill e y common in he business economy and 72 managemen heo y in Cen al and Eas e n Eu ope (e.g., Ge many, Czech Republic, and Slo akia). Howe e , how upda ed he balance shee ules in he cu en business economy and managemen a e and whe he i is possible o p o ide empi ical e idence o hei ela ion o business pe o mance managemen emain unanswe ed. To suppo his esea ch opic, only wo pape s (in English wi h no imespan limi a ion) ha ocus on balance shee ule(s) we e ound in he esea ch da abase Web o Science [6], [7] and one pape (same sea ching c i e ia) was ound in da abase Scopus [8]. The lack o a ailable esea ch pape s could be conside ed as a limi a ion o ou esea ch in e es . On he o he hand, his ac suppo s ou assump ion ha he ela ion be ween business pe o mance managemen and balance shee ules app oach should be a opic o esea ch in e es . The emainde o his pape is o ganized as ollows. The i s sec ion p o ides a heo e ical backg ound on he issue o each balance shee ule, as well as business pe o mance. This sec ion aims o ocus on he insu icien ly co e ed esea ch a ea o balance shee ules o jus i y he ollowing empi ical esea ch and o mula e he esea ch ques ion. The nex sec ion desc ibes he me hodological app oach ha was used, ollowed by he empi ical sec ion, in which da a on mic o and small businesses a e s a is ically es ed o answe he gi en esea ch ques ion. Then he esul s and limi a ions a e discussed in ela ion o he p esen ed da a. 1 Theo e ical Backg ound As men ioned abo e, balance shee ules a e conside ed a guide o he gene al inancing o businesses, and hei applica ion allows he main enance o inancial s abili y [9]. They p o ide a guideline o businesses o emain inancially heal hy o long- e m pe iods, secu ed in e ms o liquidi y, and hus p o i able. To achie e hese aims, balance shee ules ecommend main aining an app op ia e le el o inancial indica o s in he inancial and capi al s uc u es o businesses. While se e al balance shee ules exis , his s udy ocuses on he h ee mos -men ioned ules in he li e a u e (e.g. [10], [11], [12]): he golden balance shee ule, isk equaliza ion ule, and pa i ule. In addi ion, we conside hese h ee ules as he ones ha a e mos connec ed wi h business pe o mance, which is discussed in he ex below. 1.1 Balance Shee Rules The golden balance shee ule (1R) is conside ed one o he bes -known ules (e.g. [13], [12]), and i ep esen s a basic ecommenda ion o inancial and capi al s uc u es. Essen ially, he golden balance shee ule is based on he uni ica ion o ma u i y da es in inancing; hus, he inancing pe iod is coo dina ed acco ding o he capi al commi men pe iod [14]. Acco ding o his ule, ixed asse s and a pa o he cu en asse s should be inanced using in e nal capi al (equi y) and long- e m deb s, cu en asse s, subsequen ly, om sho - e m deb s/liabili ies. In o he wo ds, long- e m asse s should be inanced using a balanced a io o equi y and long- e m deb . Sho - e m asse s should be inanced, acco ding o his ule, using he sho - e m a ailable capi al [15], [16]. The consis ency in he asse s and liabili ies´ side o he balance shee is an essen ial pa ame e o he assessmen o business c edi wo hiness and a ing; hence, i is an impo an pa o he s a egic inancial planning o businesses. The golden balance shee ule p ima ily assesses ma u i y da es, bu no he ype o inancing: equi y o deb [16]. Ha ing 100%, o sligh ly highe , long- e m passi es (equi y and long- e m deb s) and ixed asse s sha es is conside ed he op imal si ua ion. In he li e a u e, his indica o is known as he deg ee o capi aliza ion; in Ge man, i is known as Anlagedeckungs ad II [15], [17], [10]. The exis ing li e a u e (e.g. [12]) s a ed ha he op imal capi aliza ion deg ee le el is 1.0. As such, by eaching his op imal le el, he ne 73 wo king capi al is ze o. This ule can also be measu ed using he ne wo king capi al o wo king capi al a io [18]. Based on he le el o he golden balance shee ule compliance, h ee app oaches o inancing a company a e iden i ied: conse a i e, agg essi e, and mode a e. A conse a i e app oach o inancing en ails using long- e m capi al o inance no only long- e m asse s bu also sho - e m asse s, which means ha companies end o use mos ly long- e m inance sou ces o inance hei daily ope a ions. On he o he hand, an agg essi e me hod o inancing en ails using sho - e m sou ces o inancing o bo h sho - e m and long- e m asse s. This may lead o illiquidi y. A mode a e app oach lies in he middle be ween agg essi e and conse a i e app oaches, wi h he sugges ion ha sho - e m inance sou ces should be used o inance luc ua ing cu en asse s. Likewise, long- e m inance sou ces should be used o inance pe manen cu en asse s [19], [20], [13]. Fu he , o add ess he ques ion o he ype o inancing, he isk equaliza ion ule (2R) is used. This ule conside s he isk posi ion o businesses and deals wi h capi al s uc u e and spli ing o passi es in o equi y and deb /liabili ies [21], [16], [22]. In p inciple, wi h highe in ol emen o deb , business p o i abili y inc eases. On he o he hand, bank up cy isk also inc eases. Thus, a highe le el o equi y p o ides business independence and c edi wo hiness [16]. Fo he s abili y and sus ainabili y o businesses, i is ecommended ha equi y and deb be spli equally, o wi h a highe p opo ion o equi y [23], [11]. This ecommenda ion leads o be e c edi wo hiness in companies, while he e ec o inancial le e age is no e ec i e. O e he decades, changes in he le el o measu ed alues ha e been no ed; cu en ly, he p opo ion o 1:2 is conside ed be e o i m p o i abili y [24], [25]. The hi d ule is called he pa i ule (3R), and i se es as an addi ional ule o he abo e- men ioned ules. I is connec ed wi h he bank up cy law and he consequence o co e ing losses called ‘pa i passu’. The ‘pa i passu’ p o ides he basic p inciple applicable in bank up cy law. Acco ding o his p inciple, c edi o s who belong o he same g oup, acco ding o he hie a chy o claims, should be ea ed in he same manne [26]. The pa i ule is impo an , especially in si ua ions whe e companies apply o addi ional deb inancing. The pa i ule ecommends ha a company should use as much equi y as i can in es in ixed asse s, ideally less, o c ea e space o long- e m deb inancing [11]. The company should main ain he so-called heal hy deb ; meaning, i uses deb capi al o an accep able ex en . I he company becomes bank up , hen all liabili ies a e sa is ied om he equi y, namely, he s a e, banks, c edi o s, and subsequen ly, he owne s. This is why inancing by equi y poses a a g ea e isk o business owne s han ha by deb capi al. While hese ules a e based on ela i ely old li e a u e [2], [3] and we e no upda ed o empi ically es ed in he las decades, hey s ill egula ly appea in he cu en li e a u e on business economics [17], [18], [10], [19], [16], [13], [22]. Fu he , hese a e s ill conside ed sui able indica o s o business p o i abili y [15] and one o he main p inciples o inancial managemen in businesses [27]. Pa icula ly, he golden balance shee ule is s ill conside ed o gua an ee o p e en liquidi y p oblems and paymen di icul ies [16]. As o he cu en empi ical es ing (as well as he cu en heo e ical app oach), only a ew scien i ic pape s (see In oduc ion) cu en ly deal wi h balance shee ules; hus, a signi ican esea ch gap was iden i ied. Howe e , o suppo he impo ance o balanced shee ules compliance, i was decided o ocus u he on esea ch in a eas ha a e ela ed o indi idual ules. Rega ding he i s golden balanced ule, he e a e cu en ly many pape s ela ed o he esea ch on business inancial s uc u e and he op imal le el o ne wo king capi al in ela ion o co po a e p o i abili y [28], [29], [30], [31], [32]. Pa icula ly, ega ding he opic o ne 74 wo king capi al, managing i and a aining i s op imal le el in ela ion o i m p o i abili y has become a popula esea ch subjec in ecen yea s [33], [34], [35], [36], [37] [38], [39]. Deloo [37] and Howo h and Wes head [39] s a ed ha he op imal le el o wo king capi al maximizes business alue and signi ican ly imp o es co po a e p o i abili y. Jacko á [30] s a es ha inancial s uc u e, as well as i s op imal le el, is in ol ed in achie ing s abili y, p ospe i y, and o e all e iciency o companies. Ha ing a wo king managemen eam plays a signi ican ole in he o e all co po a e s a egy o maximizing i m alue and p o i abili y [28], [29], [32], and i is conside ed a key pa o he o e all business s a egy o c ea e sha eholde alue. The op imal a io be ween cu en asse s and deb s, which is an impo an pa o he inancial planning o up- o-da e businesses [33], [40], indica es he exis ence o an op imal le el o wo king capi al which imp o es business pe o mance. The indings by Baños-Caballe o e al. [34], [35] p o ed ha an op imal le el o wo king capi al in es men s, which maximizes business alue and p o i abili y, exis s. Non- compliance wi h his op imal le el has a nega i e e ec on alue c ea ion and causes a dec ease in p o i abili y. Fi m manage s should aim o main ain he op imal le el as much as possible and a oid any de ia ions om i ha could des oy i m alue. The au ho s ind an in e ed U-shaped ela ionship be ween wo king capi al and i m pe o mance, which implies ha an op imal le el o in es men in wo king capi al balances he cos s and bene i s o in es men s in wo king capi al and leads o he maximiza ion o i m alue. Ak as e al. [33] excluded he possibili y ha be e pe o mance is d i en by inc easing i m isk, ollowing he adop ion o he agg essi e wo king capi al policy. This inding is also suppo ed by Nazi and A za [41], who ound a nega i e ela ionship be ween he agg essi eness o wo king capi al policies and p o i abili y. O e all, hese s udies ind ha he alue o wo king capi al and, hus, compliance wi h he golden balance shee ule (1R) should ha e a posi i e impac on business pe o mance. In addi ion, he opic o op imal capi al s uc u e and i s posi i e impac on company pe o mance is no new in he scien i ic li e a u e. D oule ý and Blažko á [42] p o ed ha highe use o deb s in he capi al s uc u e lowe s a i m’s p oduc i i y (measu ed by he o al ac o p oduc i i y [TFP] indica o ) as well as i s nega i e equi y. Spi sin e al. [31] demons a ed ha e ec i e managemen o capi al s uc u e could inc ease he p o i abili y o companies by 16–22%. Thei esul s indica e ha a U-shaped ela ionship exis s be ween company pe o mance and capi al s uc u e, wi h an op imal le el o bo owed capi al in p opo ion o o al asse s/liabili ies. In addi ion, Azhagaiah and Ga ou y [43] p o e ha capi al s uc u e has a signi ican in luence on companies’ p o i abili y. Main aining inancial and capi al s uc u e is impo an , especially o small companies, because hey a e gene ally associa ed wi h a highe p opo ion o cu en asse s (in compa ison o la ge i ms), less liquidi y, ola ile cash lows, and a eliance on sho - e m deb [39], [44]. I is also ecommended ha smalle i ms should adop o mal wo king capi al managemen ou ines o educe he p obabili y o business closu e, as well as o enhance business pe o mance. O e all, hese s udies ind ha he capi al s uc u e and, hus, he compliance o he isk equaliza ion ule (2R) and he pa i ule (3R) (which ep esen s he combina ion o 1R and 2R) should ha e a posi i e impac on business pe o mance. 1.2 Business Pe o mance and i s Measu emen I can be logically assumed ha company manage s can in luence hei company’s pe o mance h ough hei own decisions. The b oad pe o mance managemen opic deals 75 wi h his issue. As Cokins [45, p. 75] s a es, ‘pe o mance managemen is no a p ocess; a he i is he in eg a ion o mul iple me hodologies, such as cus ome ela ionship managemen , s a egy maps, balanced sco eca ds, and lean/Six Sigma quali y managemen ’. Clea ly, whe he pe o mance managemen consis s o hese di e en me hods canno be easily measu ed; he e o e, i is measu ed using many me hods, which mos ly depend on he speci ic needs o indi idual businesses. T adi ionally, indica o s such as e ec i eness (ac ual ou pu / expec ed ou pu ), e iciency ( esou ces expec ed o be consumed / esou ces ac ually consumed), and p oduc i i y (ou pu / inpu ) a e used o business pe o mance measu emen [46]. His o ically, inancial indica o s ha e been p edominan , which led Kaplan and No on [47] o p opose a balanced sco eca d me hodology. In business pe o mance li e a u e, his p edominance is s ill alid, which was con i med using a sys ema ic e iew o he esea ch on amily business pe o mance by Williams [48], who ound ha 84% o he examined esea ch used inancial da a only o measu e pe o mance. The o m o indica o s di e s; some s udies use he absolu e o m, such as Sales, Income, Tu no e , Cos s, P o i , Asse s, Fixed Capi al, and In es men s, among o he s. (e.g. [49], [50], [51]). O he s use ela i e o ms, such as Re u n on Asse s (ROA), Re u n on Equi y (ROE), Re u n on Sales (ROS) [52], [53], [54] o ma ke -based o ms, such as Tobin’s Q o QRATIO [55], [56]. This is also con i med by Williams [48] (2018), who s a es ha he se en indica o s mos equen ly used in business pe o mance s udies ( om s udies on amily businesses published in pee - e iewed jou nals, om 1980 h ough 2015) a e ROA, Sales, P o i , Tobins’Q, ROE, Re u n on In es men (ROI), and ROS. In his s udy, business pe o mance is measu ed using ROE as he a io o he en e p ise’s ne p o i o capi al in es ed by he owne . 𝑅𝑂𝐸 = 𝐸𝐵𝑇 𝐸𝑞𝑢𝑖𝑡𝑦 (1) This is because, al hough he business’s abili y o app ecia e he capi al o owne s is e y impo an in businesses, in small and mic o businesses, i is essen ial because, e y o en, owne s also manage hei businesses. Thus, hey can indi ec ly in luence he alue o his indica o wi h hei own decisions. P elimina y esea ch was also conduc ed, and o he indica o s such as ROA, ROS, and IN99 we e used; howe e , he s udy esul s a e simila . 1.3 Resea ch Objec i e Findings om he abo e-men ioned li e a u e e iew suppo he heo y o balance shee ules and an op imal le el o deb , liabili ies, and capi al s uc u e. A his op imal le el, a balance is achie ed be ween isk and e iciency in businesses. In he li e a u e e iew, many a icles ha e deal wi h he opic o ne wo king capi al and capi al s uc u e sepa a ely, bu no s udy connec s hese wo inancial managemen opics o a emp s o examine hei impac on business pe o mance. In esponse o he posi i e e ec s on business pe o mance, balance shee ules heo y, as well as he empi ical p oo ha an op imal le el o ne wo king capi al and op imal capi al s uc u e exis , i aises he ques ion o whe he compliance wi h he balance shee ules can posi i ely a ec business pe o mance. Thus, his s udy ocuses on conduc ing in es iga ions o ob ain such empi ical e idence. Using empi ical da a, his s udy aims o explo e he possible e ec o compliance wi h he balance shee ules on business pe o mance o mic o and small businesses in he Czech 76 Republic. By conduc ing empi ical esea ch, his s udy’s main bene i is ha i examines whe he he op imal le el s a ed by each balance shee ule has some jus i ica ion in business eali y. Based on he heo y p esen ed in he p e ious sec ions, he ollowing esea ch ques ion was o mula ed: Q: Does compliance wi h he balance shee ules posi i ely a ec business pe o mance o mic o and small en e p ises? One o he assump ions made in his s udy is ha inancial s abili y should logically lead o highe business pe o mance; hus, we do no conside any signi ican di e ence be ween long- e m inancial balance/s abili y and business pe o mance. 2 Resea ch Me hodology 2.1 S a is ical Me hods o Resea ch P o ing he ela ionship be ween selec ed ac o s and business pe o mance is a e y di icul ask, which is limi ed by he exis ing me hods. La gely, hese ypes o s udies aim o p o e he co ela ion be ween di e en quan i ies. Howe e , esea che s mus conside ha he p o en co ela ion does no au oma ically imply causa ion. The indica o s de i ed om indi idual balanced ules a e shown in Tab. 1. Tab. 1: Indica o s de eloped o assess he abili y o businesses o ollow he balance shee ules Rule Indica o Recommended alue 1R (equi y + long e m deb ) / ixed asse s 0.8-1.2 2R equi y / o al liabili ies 0.4-0.6 3R ixed asse s / equi y >1 Sou ce: Own F om he na u e o he compiled indica o s, ( ega ding balanced ules) i is ob ious ha he co ela ion analysis canno be p ocessed because i s esul s would no be meaning ul. This is because he ‘bes alues’ a e no he highes o he lowes , bu hose alling wi hin a ce ain ange. Thus, he au ho s decided o di ide all he companies in o di e en ca ego ies, depending on how success ul hey we e a complying wi h he balanced ules. These ca ego ies a e as ollows. Ca ego y A: En e p ises ha comply wi h all h ee ules Ca ego y B: En e p ises ha comply wi h a leas 2 ules Ca ego y C: En e p ises ha comply wi h a leas 1 ule Ca ego y D: En e p ises ha comply wi h jus 1 ule Fi s , basic desc ip i e s a is ics (min, max, median, and a e age) we e calcula ed. Da a we e es ed o no mali y using he Shapi o-Wilk es , which showed ha he da a we e no no mally dis ibu ed. Howe e , pa ame ic s a is ics could be used because he sample size is la ge enough no o dis o he esul s [57]. As such, o answe he esea ch ques ion, each ca ego y was analyzed using - es s (unpai ed wo-sample - es s) oge he wi h desc ip i e s a is ics. T- es s should e eal whe he he di e ences be ween he ROE alues o wo g oups o en e p ises ( ha comply and do no comply wi h he ules) wi hin each ca ego y a e signi ican . Howe e , he da a did no ul ill he assump ion o homogenei y o a iance; hus, 77 he esul s could be dis o ed. The e o e, he non-pa ame ic equi alen o he - es (Mann- Whi ney U es ) was used as well. All calcula ions we e conduc ed using he p og am STATISTICA 12 S a So CR, s. . o. 2.2 Da a To examine he ela ionship be ween balance shee ules compliance and business pe o mance, he da ase o his s udy is based on 2,537 businesses. All da a we e collec ed om he Da abase Albe ina – Gold edi ion (Bisnode, 2018). The o iginal aim was o examine he en i e da ase o mic o and small businesses in he Czech Republic (middle and la ge businesses we e excluded because o hei highe p obabili y o cash pool inancing, which would dis o he esul s). Un o una ely, he e we e app oxima ely 10,000 such business en i ies in he Czech Republic, which could no be analyzed due o echnical issues. Thus, only one egion ( he Pilsen egion) was selec ed and es ed o answe he esea ch ques ion. The esul ing 2,537 en i ies ep esen he whole popula ion o mic o and small businesses in he Pilsen egion; howe e , in his s udy, hey a e conside ed a andom selec ion o he en i e popula ion o mic o and small businesses in he Czech Republic. F om he o iginal da ase o 2,537 businesses da a o app oxima ely 100 businesses we e dele ed because o e o alues o ROE. Fu he , he da a o 745 businesses, whose ixed asse s had a alue o 0, we e also dele ed (as his made i impossible o calcula e he i s and hi d indica o s o he balance shee ules). In addi ion, 10 businesses we e excluded because o hei ex eme ROE alues (abo e 1,000% and less han 1,000%). Finally, 1,682 en e p ises we e included in he analysis. 3 Resea ch Resul s Tab. 2 shows he desc ip i e s a is ics o he ROE and ule indica o s, as well as hei ecommended alues (median and a e age can p o ide in e es ing in o ma ion when compa ed o ecommended alues). Tab. 2: Desc ip i e s a is ics (n = 1,682, small and mic o businesses in he Pilsen egion, 2018) Max Min Median A e age Recommended ROE 776.470 –781.400 18.325 29.449 1R 41,737.000 0.008 2.156 38.041 0.8-1.2 2R 1.321 0.002 0.534 0.526 0.4-0.6 3R 126.976 0.000 0.555 1.793 >1 Sou ce: Own p ocessing o [58] Howe e , om his able, i is no possible o assess how businesses success ully comply wi h hese ules, and simple da a il e ing had o be done. The esul s o each ca ego y a e as ollows: Ca ego y A: 53 businesses comply wi h all h ee ules (1,629 do no ). Ca ego y B: 274 businesses comply wi h a leas wo ules (1,435 do no ). Ca ego y C: 832 businesses comply wi h a leas one ule (850 do no ). Ca ego y D: 249 businesses comply wi h he i s ule, 336 comply wi h he second ule, and 546 comply wi h he hi d ule. I is ob ious ha mos businesses do no success ully comply wi h he ules. Only 53 companies (ou o 1,682) comply wi h all h ee ules, and less han hal comply wi h a leas one. Mo e de ailed esul s a e p esen ed in Tab. 3, which shows addi ional desc ip i e 78 s a is ics o he ROE alues o he g oups o businesses, acco ding o hei abili y o comply wi h he ules. Tab. 3: Desc ip i e s a is ics o ROE di ided in o ca ego ies A, B, and C (n = 1,682, small and mic o-businesses in he Pilsen egion, 2018) A B C Comply Do no comply Comply Do no comply Comply Do no comply Numbe 53 1629 247 1435 832 850 ROE A e age 14.75 29.93 18.06 31.40 31.49 27.45 Median 7.58 18.66 15.70 18.66 20.35 17.12 Min –25.99 –781.40 –507.56 –781.40 –781.40 –202.94 Max 72.29 776.47 355.00 776.47 776.47 478.65 Sou ce: Own p ocessing o [58] In Tab. 3 he highe median and a e age ROE alues (wi hin each g oup) a e ma ked in bold. Con a y o he expec ed esul s, in wo cases, ROE is highe in he g oup o businesses ha do no comply wi h he ules. Al hough his low alue o ROE could be a ibu ed o he e y low numbe o cases (and hei s a is ical insigni icance), i he ules could posi i ely a ec business pe o mance, he ROE alues would be much highe in his g oup and no he opposi e. Only he hi d g oup (C: businesses ha comply wi h a leas one ule) had highe a e age and median ROE alues in he g oup ha complied. Thus, his could indica e he possible in luence o balance shee ules on business pe o mance. To answe he esea ch ques ion, u he calcula ions we e pe o med. Addi ionally, i is in e es ing o examine which ule is he mos o en ollowed. Ou o 1,682 businesses, 32% (546 in o al) comply wi h he hi d ule. The mos impo an ule, he golden ule, is ollowed in he leas cases (only 15 % o all businesses). In Tab. 4, desc ip i e s a is ics o ROE o businesses ha comply wi h indi idual ules (Ca ego y D) a e shown. The la ges ROE, in e ms o median and a e age, was ound in businesses ha comply wi h he hi d ule. Tab. 4: Desc ip i e s a is ics o ROE o businesses ha comply wi h he ules (Ca ego y D), acco ding o ecommended alues o 1R, 2R, and 3R (n = 1,682, small and mic o businesses in Pilsen egion, 2018) Comply 1R 2R 3R Numbe 249 336 546 ROE A e age 17.60 29.24 31.59 Median 13.85 18.02 21.53 Min –507.56 –88.00 –781.40 Max 355.00 706.93 776.47 Sou ce: Own p ocessing o [58] Subsequen ly, a - es was pe o med, and he esul s a e p esen ed in Tab. 5 (g oup o businesses ha ollow he ules is ma ked as F, and he opposi e is ma ked as DF). Un o una ely, he assump ion o homogenei y o a iance was no me (see he igh pa o Tab. 5); hus, he assump ions o his s a is ical es a e iola ed, and i s esul s canno be used. (I is clea ha he esul s would no suppo he possible posi i e e ec o balance shee ules on business.) 79 Tab. 5: T- es esul s (n = 1,682, small and mic o businesses in Pilsen egion, 2018) Va . - es Le ene Mean (F) Mean (DF) d. . p Valid N (F) Valid N (DF) Le ene p A 14.75 29.93 -1.37 1,680 0.17 53 1,629 5.64 0.02 B 18.06 31.40 -2.44 1,680 0.01 247 1,435 0.85 0.36 C 31.49 27.45 1.04 1,680 0.30 832 850 51.24 0.00 Sou ce: Own p ocessing o [58] The nex logical s ep was o use he non-pa ame ic equi alen o he unpai ed wo-sample - es , which is he Mann-Whi ney U es . The esul s a e p esen ed in Tab. 6. Acco ding o he esul s, he null hypo hesis (‘ he dis ibu ions o bo h popula ions a e equal’) is ejec ed in g oups A and B (a he signi icance le el α = 0.05), which indica es ha he ROE alues o hese g oups o businesses di e . This could suppo he p emise o he posi i e e ec o balance shee ules on business pe o mance; howe e , om Tab. 3, i is clea ha he median o hese ca ego ies is highe in bo h cases in he g oup o businesses ha do no ollow he ules. This would indica e opposi e esul s han expec ed. In addi ion, he U es e ealed equal dis ibu ions o bo h popula ions (F and DF) we e ound in g oup C (p- alue > 0.05), which can be in e p e ed as ollows: alues o ROE a e no signi ican ly di e en wi hin each g oup (al hough median alues sugges o he wise, see Tab. 3). Tab. 6: Mann-Whi ney U es esul s (n=1,682, small and mic o businesses in Pilsen egion, 2018) Va . Rank Sum (F) Rank Sum (DF) U Z p- alue Valid N (F) Valid N (DF) A 33,975 1,381,428 32,544 -3.053 0.002 53 1,629 B 191,257 1,224,146 160,629 -2.353 0.019 247 1,435 C 711,496 703,907 342,232 1.141 0.254 832 850 Sou ce: Own p ocessing o [58] Thus, om he p esen ed esul s (especially in Tab. 3 and Tab. 6), i is clea ha he e is no e idence ha he balance shee ules posi i ely a ec he business pe o mance o mic o and small businesses. In con as , he esul s ( o ca ego ies A and B) con i m ha he g oup ha does no ollow he ules has be e pe o mance. In addi ion, when he ules we e examined in mo e de ail using desc ip i e s a is ics (Tab. 4), i was ound, ha ules a e no mos ly ollowed. In mos cases (32%), businesses ollow he hi d ule. Ou o hese h ee ules, he hi d is also he ule which ul illmen is ela ed o he highes a e age alue o ROE. Thus, based on he esul s o his s udy, pa ly due o he small sha e o he businesses, ha do ollow he ules, i canno be p o en ha he balance shee ules posi i ely a ec he business pe o mance o mic o and small businesses, and he esea ch ques ion canno be answe ed posi i ely. Conclusion This s udy ocuses on he p ac ical use ulness o balance shee ules. I aimed o p o e he posi i e e ec o balanced shee ule compliance on business pe o mance, using empi ical da a. Real da a o mic o and small businesses om he Pilsen egion in he Czech Republic ( o al numbe 2,537) we e es ed using s a is ical me hods (mainly Mann-Whi ney U es ). Howe e , his posi i e e ec was no p o en (median and a e age ROE alues o he g oups o businesses ha comply wi h a leas wo ules we e lowe han hose who do no comply wi h hem, his di e ence was p o en by Mann-Whi ney U es ), and nei he was he p edominan compliance among businesses. The esea ch ques ion “Does compliance wi h he