The link between the quality of mission statements and corporate financial performance: An empirical investigation

Abstract

In this article the potential relationship between the quality of mission statements and the corporate financial performance of companies listed in the industrial section of the Johannesburg Stock Exchange (JSE) is investigated. The mission statements submitted were evaluated by the method of content analysis whereby an ordinal value, MSQI, was assigned to each mission statement. Thereafter companies were ranked in terms of the MSQI values. Financial performance was measured in terms of three variables: average return on equity; average return on assets; and share return. These were calculated over different time intervals depending on how long the company had been operating with the mission statement. Two statistical techniques were employed to test for relationships between the performance variables and the quality of the mission statements (MSQI), namely Spearman's rank order correlations and two-sample analysis of means. The majority of correlation coefficients were negative, although only one was statistically significant. It may therefore be concluded (except for the one exception) that the quality of mission statements is not related to corporate financial performance. Possible explanations for this finding are offered.