RESEARCH ARTICLE Firm performance and ownership structure: Dynamic network data envelopment analysis approach Kuo-Cheng Kuo 1 | Wen-Min Lu 2 | Thanh Nhan Dinh 3,4 1 Program of Global Business, Chinese Culture University, Taipei, Taiwan 2 Department of Financial Management, National Defense University, Taipei, Taiwan 3 Department of International Business Administration, Chinese Culture University, Taipei, Taiwan 4 Department of Accounting-Finance, College of Commerce, Da Nang, Vietnam Correspondence Thanh Nhan Dinh, Department of International Business Administration, Chinese Culture University, No. 55, Hwa-Kang Road, Yang-Ming-Shan, Taipei, Taiwan. Email: thanhnhan2905@gmail.com This paper applies dynamic network slacks-based data envelopment analysis to mea- sure financial performance based on the interrelationship among investment, financ- ing, and dividend decisions. The empirical results show that financial performance is determined simultaneously by the efficiency of decisions, and sample firms have good performance in investment stage, but need to improve their financing and divi- dend policies. The proposal financial performance measure explains the multicriteria of decision-making rather than the single financial ratios. Besides, the research con- tributes a novel on the significant relationship between firm's ownership structure in the form of managers, government and foreign shareholders, and the firm's financial performance. 1 | INTRODUCTION Being considered as being multidimensional in nature (Gordon et al., 2015; Modi & Mishra, 2011), financial performance mostly refers to earnings and losing as well as the ability of firm in meeting financial obligations and satisfying the shareholders and related stakeholders. Regarding to measurement, the accounting-based and market-based indicators are used widely in the form of stock returns, Tobin's Q or other financial ratios in form of profitability, liquidity, or asset utiliza- tion (Baird, Geylani, & Roberts, 2012; Delen, Kuzey, & Uyar, 2013; Modi & Mishra, 2011). Each firm basically has its three heterogeneous financial decisions named investment, financing, and dividend, and they simultaneously determine the expected growth of firm over time (Fama & French, 1998; Lang, Ofek, & Stulz, 1996). Parker (2010) defines investment decision as transactions that create the increment of real aggregate wealth combines three categories of business fixed investment, inventory investment, and residential investment, and investment could be enhanced to research and development and employment demands (Hubbard, 1997). Furthermore, in typical busi- ness firms, they are simultaneous evaluating investment opportunities and possible resources of funds (Teichroew, Robichek, & Montalbano, 1965); therefore, the investment and financing decisions are usually combined or mixed in research of decision-making procedure. Miller and Modigliani (1961) state that the growth of dividends or dividend decision depends on the growth of earning originated from investment opportunities and level of external financing. The authors also introduce an equation on the relationship between dividend growth rate and firm share prices. Generally, referring to three finan- cial decisions, there is a variety of researches that focus on their inter- relationship in assumptions of imperfect market and interfere with transaction costs, taxes, agency problem, or information asymmetry (McDonald, Jacquillat, & Nussenbaum, 1975; Wang, 2010). Based on these, it could be considered that financial performance is the out- come of three simultaneous financial decisions. For example, a firm utilizes the assets and financial sources to generate revenues and bal- ance the operating and financial risk, and the next step is deciding the earning payout to meet the requirement of relevant parties and future growth estimation. Consequently, a model that is able to observe all the activities is necessary. Beginning with the traditional black-box, data envelopment analy- sis (DEA; Charnes, Cooper, & Rhodes, 1978) has developed and applied widely in diverse research areas (Emrouznejad & Yang, 2018; Liu, Lu, Lu, & Lin, 2013). The development of DEA approach in analyz- ing financial performance begins with the work of Yeh (1996) and Ozcan and McCue (1996). According to Yeh (1996), ratios analysis that are commonly used by financial analysts have one drawback is “each single ratio must be compared with a benchmark ratio one at a time, whereas one assumes that other factors are fixed and the benchmarks chosen are suitable for comparison.” Because an individ- ual key performance indicator can bias the analysis and miss Received: 10 September 2019 Revised: 12 November 2019 Accepted: 30 November 2019 DOI: 10.1002/mde.3124 Manage Decis Econ. 2020;1–16. wileyonlinelibrary.com/journal/mde © 2020 John Wiley & Sons, Ltd. 1