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Design and Validation of a Value Chain-Based Strategic Cost Reduction Model and its Impact on Financial Performance and Value of Companies on the Tehran Stock Exchange
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Abbas Hussein Ashour *   |
| Associate Professor, Amarah Polytechnic College, Southern Technical University, Amarah, Iraq. , abbas.h.ashour@stu.edu.iq |
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Abstract: (6 Views) |
This study aims to design and validate a strategic cost management model based on the value chain and to examine its impact on the financial performance and value of companies listed on the Tehran Stock Exchange. The research is applied in nature and employs an exploratory-explanatory mixed-methods design, conducted in three stages. In the qualitative stage, using thematic analysis and interviews with 12 experts, the model's dimensions were identified across five main themes: financial management of procurement, cost management in manufacturing processes, logistics and working capital management, financial engineering of marketing and sales, and corporate governance. In the quantitative stage, the derived model was validated using Partial Least Squares Structural Equation Modeling (PLS-SEM); results indicated that all five dimensions have a positive and significant effect on strategic cost reduction. In the empirical stage, the impact of the composite strategic cost reduction index on financial performance and firm value was tested using panel data from 109 companies (covering the period from 2015 to 2024) and employing fixed-effects panel regression models alongside the cross-sectional GLS method. Findings revealed that the composite strategic cost reduction index has a positive and significant effect (at the 1% level) on Return on Assets (0.084), Return on Equity (0.137), and firm value (0.296) across all three models. Furthermore, an artificial neural network—achieving a coefficient of determination (R²) of 0.735 in the test set—demonstrated superior predictive power compared to linear regression models (which yielded R² values between approximately 0.45 and 0.52). Research findings indicate that strategic cost management across the value chain—leveraging synergies between operational efficiency, working capital optimization, and the intelligent management of suppliers and customers—can enhance profitability while simultaneously increasing the firm's market value and generating shareholder wealth. Based on these results, corporate managers are advised to elevate their cost-reduction approach from the operational level to a strategic, integrated level spanning the entire value chain; furthermore, capital market policymakers are encouraged to foster greater financial transparency by formulating guidelines for value-chain-based cost disclosure. |
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| Keywords: Strategic cost management, value chain, financial performance, firm value, artificial neural network, panel data. |
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Full-Text [PDF 989 kb]
(4 Downloads)
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Article type: Research |
Subject:
Special
Received: 2026/04/6 | Accepted: 2026/08/15
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