A New Look at the Longitudinal Relationship Between Motor Carrier Financial Performance and Safety

AuthorJason W. Miller,John P. Saldanha
Publication Date01 September 2016
Date01 September 2016
A New Look at the Longitudinal Relationship Between Motor
Carrier Financial Performance and Safety
Jason W. Miller
and John P. Saldanha
Michigan State University
West Virginia University
Motor carrier safety impacts the well-being of the traveling public and the economic well-being of the shippers who entrust motor carriers
with safely transporting freight. Shippers are affected by motor carrier safety due to accidents damaging their cargo and disrupting their
customersoperations. One characteristic frequently theorized to predict motor carrier safety is motor carriers nancial performance. However,
the literature offers mixed evidence linking motor carrier nancial performance to safety. This does not help practitioners or policy makers and
necessitates research to resolve these inconsistent ndings, which we undertake in this research. We extend previous work by developing a
theoretical framework based on strain theory to explain why both absolute (static) nancial performance and year-to-year change in nancial
performance should uniquely affect carrier safety. We test our hypotheses by tting mixed-effects models to a repeated-measure, longitudinal
database of publically traded motor carrier nancial performance and safety measures. Results indicate that nancial performance measures
uniquely affect carrier safety. These ndings attempt to resolve the inconsistencies in the past literature and, carry important implications for
researchers studying motor carrier safety, motor carrier managers, shippers, and policy makers.
Keywords: motor carriers; nancial performance; safety performance; strain theory; time series; mixed-effects models
In 2011 alone, commercial truck drivers in the United States
were involved in over 60,000 serious crashes that resulted in
over 3,750 fatalities and another 88,000 serious injuries (Federal
Motor Carrier Safety Administration 2013). Beyond the direct
loss of life, estimated at over $15 billion (Zaloshnja and Miller
2006; Corsi et al. 2014), these accidents disrupt operations of
shippers and consignees, resulting in serious economic harm
(Hendricks and Singhal 2003). In the case of the more serious
accidents that close major trafc arteries, rms beyond a given
shipper-carrier-consignee triad can be negatively impacted due to
delays and diversions (Cantor et al. 2006). As such, motor car-
rier safety is a concern for all supply chain members (Cantor
A key assumption adopted by policy makers overseeing motor
carrier safety is that carrier management practices affect motor
carrier safety (Mejza et al. 2003). This assumption is predicated
on the belief that policies and procedures implemented by man-
agement affect: (1) vehicle maintenance practices (Chow 1989),
(2) the pressures drivers face to comply with hour-of-service
(HOS) rules (Crum and Morrow 2002), and (3) how truck dri-
vers operate their vehicles, in turn inuencing their propensity to
have accidents (Cantor et al. 2010). Thus, understanding the fac-
tors that shape carrier management practices is critical to improv-
ing motor carrier safety (Mejza et al. 2003). One such factor is
motor carrier nancial performance (Britto et al. 2010). Scholars
have put forth a variety of arguments supported by anecdotal evi-
dence as to why carriers with better nancial performance should
have higher levels of safety. These arguments predominantly
focus on the impact poor nancial performance has on managers
delaying maintenance (Adams 1989; Chow 1989; Beard 1992)
and pushing drivers to work until they are excessively fatigued
(Bruning 1989; Rodr
ıguez et al. 2004).
Despite the intuitive appeal, results from empirical testing of
the relationship between nancial performance and carrier safety
have been inconsistent. Rodr
ıguez et al. (2004) and Corsi (2004)
nd no signicant association between different nancial ratios
and various safety measures tracked by the Federal Motor Carrier
Safety Administration (FMCSA). Contrary to the anecdotal evi-
dence, Hunter and Mangum (1995) nd that an increase in rev-
enue per mile between 1985 and 1986 (i.e., revenue per mile
was higher in 1986) positively predicted preventable accident
rates in 1986. Furthermore, in the instances where statistical
analyses have been consistent with the anecdotal evidence, the
amount of variance in carrier safety explained by nancial per-
formance is limited. For example, Corsi et al.s (1988) models
explain less than 8% of the variance in motor carrier accidents,
whereas Britto et al.s (2010) regression models explain less than
15% of the variance in the FMCSAs carrier safety rankings.
Beyond the broader issue of the inconsistent ndings, the low
explanatory power raises an important practical concern for prac-
titioners and policy makers: the use of nancial metrics as
reliable diagnostic tools of future carrier safety (Corsi 2004).
In this research, we contribute to the literature in three key
ways. First, we develop a theoretical framework, based on the
core principles of strain theory (Agnew 1992; Agnew et al.
2009), to provide the rationale for the effect of nancial perfor-
mance on carrier safety. This framework not only provides a sin-
gle unifying explanation for previous anecdotal evidence but also
suggests that the inconsistent and weak ndings may have
resulted from scholars only considering absolute (static) nancial
performance (e.g., return on assets), and neglecting change in
nancial performance (e.g., the year-to-year change in return on
assets) as a predictor of carrier safety. As we will explain, strain
theory suggests that change in nancial performance will have
Corresponding author:
John P. Saldanha, College of Business & Economics, West Virginia
University, 1601 University Avenue, Room # 309, Morgantown,
WV 26505, USA; E-mail: jpsaldanha@mail.wvu.edu
Journal of Business Logistics, 2016, 37(3): 284306 doi: 10.1111/jbl.12134
© Council of Supply Chain Management Professionals
unique effects on safety, holding constant a carriers current
absolute level of nancial performance. Second, we test the
unique effects of both absolute nancial performance and change
in nancial performance on carrier safety. Results from these
tests indicate that these measures of nancial performance dis-
play unique effects on different measures of carrier safety. Third,
we depart from previous research by utilizing a repeated-mea-
sure, longitudinal design. This allows us to partition the variance
in carrier safety into rm-level and rm-occasion-level compo-
nents, which allows us to uncover the greatest source of safety
variance and target inference at this source. By leveraging this
advantage of repeated-measures data, we are able to nd a stron-
ger relationship between motor carrier nancial and safety perfor-
mance than seen in extant literature.
The remainder of this article is structured in ve sections. The
rst section summarizes the extant literature. The next section
describes strain theory and formulates our hypotheses. The third
section details the research methodology and statistical analysis.
The fourth section summarizes theoretical and managerial contri-
butions, highlights limitations, and suggests directions for future
research, which is followed by a brief conclusion.
Given the multiple stakeholders with a vested interest in safe
motor carrier operations, it is not surprising that substantial inter-
est has been directed toward understanding the relationship
between motor carrier nancial performance and safety
ıguez et al. 2004). In the interest of parsimony, we have
summarized these studies in Table 1.
Three points from Table 1 are relevant to our investigation.
First, except for Hunter and Mangum (1995), scholars have only
examined the impact of absolute (static) nancial performance on
carrier safety, neglecting the study of how changes in nancial
performance affect motor carrier safety. It is critical to study the
latter effect as it provides a more complete picture of a carriers
current nancial position. For example, consider two motor carri-
ers that have identical nancial performance, which is above the
industry average. However, these carriers might have completely
different nancial trajectories (i.e., one carriersnancial perfor-
mance could be increasing whereas the othersnancial perfor-
mance could be decreasing). If scholars only test how absolute
nancial performance affects safety, their model would treat
these carriers as identical when, in fact, they arguably are in dif-
ferent nancial positions. We contend that the near exclusive
focus on absolute nancial performance, to the exclusion of
changes in nancial performance, might explain the inconclusive
results. Therefore, simultaneously examining both absolute nan-
cial performance and change in nancial performance is critical
to developing a more holistic understanding of the effects of car-
rier nancial performance on carrier safety.
The second point from Table 1 is that the preponderance of
this research was conducted immediately following the deregula-
tion of interstate motor carrier operations by the Motor Carrier
Act of 1980. As cautioned by Davis (2010), it is dangerous to
assume that past relationships will continue to hold given that
the institutional environment is continually evolving. Given that
we can reasonably assume that motor carriers have had time to
adjust to the shock of deregulation, the past relationship between
nancial performance and safety may not hold, necessitating fur-
ther examination (Goldsby and Autry 2011). The literature com-
piled in Table 1 supports this contention that results from
statistically testing the relationship between nancial performance
and safety have become more inconsistent over timethe major-
ity of the studies report signicant ndings in the decade follow-
ing deregulation while only half of recent studies return some
signicant results.
The third point from Table 1 is that scholars have relied
exclusively on testing the relationship between nancial perfor-
mance and safety using cross-sectional data. While such tests are
certainly informative, using a repeated-measures longitudinal
design gives scholars greater exibility to study this relationship.
In particular, a repeated-measures design allows scholars to uti-
lize the mixed-effects modeling framework to partition the aggre-
gate variance in motor carrier safety into different orthogonal
sources (Singer and Willett 2003). In particular, we focus our
attention on partitioning aggregate safety variance into between-
carrier variation (i.e., stable average differences in safety across
carriers) and within-carrier variation (i.e., variation of an individ-
ual carriers safety around its average). This partitioning allows
us to tailor the modeling process by structuring measures of
nancial performance such that they explain the largest source of
variance in motor carrier safety (Hoffman 2015). Apart from its
statistical advantages, a longitudinal approach is theoretically
appealing because it provides greater understanding of the nan-
cial performance-safety relationship vis-
a-vis cross-sectional
designs that cannot distinguish between these sources of variance
(Fitzmaurice et al. 2011).
As alluded to in the introduction, one of the gaps in this liter-
ature is that a theoretical framework has yet to be articulated
to explain why motor carrier nancial performance should
affect motor carrier safety. While scholars have noted that
poor nancial performance may cause managers to reduce
maintenance expenditures (Adams 1989; Beard 1992), push
drivers to work faster or longer (Bruning 1989; Rodr
et al. 2004), and/or accept shipments that cannot be delivered
within time windows without violating speed or HOS rules
(Ouellet 1994), this anecdotal evidence has yet to be united
under a single framework. More importantly, such a frame-
work should specify fundamental assumptions about human
behavior necessary to articulate the mechanisms explaining the
relationship between motor carrier nancial performance and
motor carrier safety (Steel 2004; Morgan and Winship 2007).
This is consistent with arguments from organizational theory
that researchers investigating organizational-level phenomena
should explicate the underlying mechanisms (i.e., processes)
that are assumed to induce the observed phenomena (Whetten
1989; Staw 1991; Stinchcombe 1991; Sutton and Staw 1995;
Haig 2005; Greve et al. 2010). We present such a theoretical
framework building on strain theory, one of the dominant the-
ories in criminology and sociology to explain illegal behavior
(Merton 1938; Agnew 1992).
Motor Carrier Fin. & Safety Performance 285

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