Page 243 - Social Enterprise A New Business Paradigm for Thailand

economic objectives. As a result, social enterprises often face the need to trade off certain
resources in order to fulfill their social missions, whether during the start-up phase or when
seeking public funding through crowdfunding (Kickul & Lyons, 2015).

A study by Hussain, Ahmad, and Mia (2023) found that market-oriented social enterprises tend

to achieve stronger financial performance. Additionally, when social enterprises adopt a
customer-centric approach, both financial and social performance improve. Notably, those that
combine a market-driven focus with social entrepreneurship demonstrate the highest overall
performance, indicating a strong correlation between overall organizational performance and
financial performance in the context of social enterprises.

This study focuses on the financial performance of social enterprises, as it serves as a key
indicator of their viability and long-term sustainability. Social enterprises often have limited
access to funding sources, and their financial outcomes are frequently unappealing to potential
investors. Their products and services may fail to generate the intended revenue, and they

commonly face liquidity challenges, both in terms of cash flow and reserve capital. Furthermore,
many lack the knowledge and skills required to effectively manage budgets and control
expenditures (Meadows & Pike, 2010).

8.1.2 Measuring Financial Performance

According to Hussain, Ahmad, and Mia (2023), the financial performance of social enterprises
is a multidimensional concept that can be assessed through their operational outcomes. A

literature review conducted by Pham, Do, Doan, Nguyen, and Pham (2021), Singhal et al. (2024),
and Baby, Mia, and Pitchay (2024) found that most researchers select performance indicators
based on the specific objectives of their studies. These indicators generally fall into three
categories: (1) accounting-based measures, such as return on assets (ROA), return on
investment (ROI), return on sales (ROS), return on equity (ROE), and return on capital employed
(ROCE); (2) market-based measures, including market share and earnings per share (EPS); and
(3) combined accounting and market-based measures, such as Tobin’s Q.

Lassala, Orero-Blat, and Ribeiro-Navarrete (2021) argue that market-based measures capture

expectations of an organization’s future profitability, which can be influenced by a range of
macro-level factors. In contrast, accounting-based measures are considered more effective
indicators, as they reflect the organization’s actual financial behavior. However, a notable
drawback of accounting-based measures is their vulnerability to manipulation, as organizations
may engage in earnings management practices that conceal financial irregularities.

Batchimeg (2017) categorized the factors influencing financial performance into four main
groups: (1) Growth, measured through indicators such as liquidity, business expansion, owner
earnings, management profit performance, leverage ratio, and capital investment; (2)

Profitability, assessed using gross profit margin, cost-to-revenue ratio, and return on costs; (3)

209