The Impact of Entrepreneurial Orientation on Market Performance in South African Commercial Banks

Abstract

Heterodox economics has been fundamental in shaping our understanding of the importance of entrepreneurial activity in contributing to economic growth both at a micro and macro level. A large part of facilitating this growth is through the intermediation functions of the financial services sector who like any profit maximising organisation relies on renewal strategies to create value for its customers and generate wealth for its shareholders. To this effect EO represents key entrepreneurial processes by which organisations continuously renew their strategic outlook intended to drive performance and achieve long-term economic value. However, it is difficult to drive renewal strategies for improved performance in the face of scarce information. The motivation of this study was driven by the need to contextually understand the dynamics of the EO-performance relationship in South African listed commercial banks. This study endeavoured to elaborate on and clarify the associative links between the presence of EO dimension (proactiveness, innovativeness and risk-taking) cues and their direct impact on market performance. Secondary textual data gathered from the annual integrated reports of the listed commercial banks was obtained through text analysis to extract the presence of EO cues. The presence of these cues was then assessed in relation to stock price movements which relied on the event-study methodology. Due to small sample challenges, findings from the analysis were not in-line with the priori expectation of the study across all variables and lack generalisability. The study’s finding also add contextual relevance considering the South African regulatory context and the current market dynamics of the financial services sector