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Sectoral and Firm-Level Determinants of Profitability: A Multilevel Approach


Affiliations
1 Department of Regional and Business Economics, Mendel University in Brno, Brno, Czech Republic
2 Department of Entrepreneurship, University of Economics, Prague, Praha, Czech Republic
 

The paper aimed to contribute to the literature on the determinants of firm profitability, from the perspective of the Czech economy. We followed a multilevel/hierarchical approach towards the analysis of the sectoral and firm-level determinants of the profitability of companies operating in the Czech food processing industry during years 2005-2012 (622 Firms in 10 Sectors). We assessed an impact of industry (i.e. market concentration, sector growth rate and growth rate of imports) and firm-level characteristics (i.e. market share, firm age, firm size, number of employees, debt/equity ratio and short-term risk) on the return on assets (ROA). Surprisingly, there were no substantial differences between the separate models for industry and firm-level determinants and a combined one. We found a positive impact of market concentration and market share and a negative effect of age and risk-taking behaviour on a firm profitability. Based on these findings, managers in the Czech food and drink industry should pay more attention to the debt policy.


Keywords

Firm Profitability, Return on Assets (ROA), Industry and Firm Effects, Multilevel Analysis, Czech Food and Drink Industry.
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  • Sectoral and Firm-Level Determinants of Profitability: A Multilevel Approach

Abstract Views: 327  |  PDF Views: 110

Authors

Ivana Blažková
Department of Regional and Business Economics, Mendel University in Brno, Brno, Czech Republic
Ondřej Dvouletý
Department of Entrepreneurship, University of Economics, Prague, Praha, Czech Republic

Abstract


The paper aimed to contribute to the literature on the determinants of firm profitability, from the perspective of the Czech economy. We followed a multilevel/hierarchical approach towards the analysis of the sectoral and firm-level determinants of the profitability of companies operating in the Czech food processing industry during years 2005-2012 (622 Firms in 10 Sectors). We assessed an impact of industry (i.e. market concentration, sector growth rate and growth rate of imports) and firm-level characteristics (i.e. market share, firm age, firm size, number of employees, debt/equity ratio and short-term risk) on the return on assets (ROA). Surprisingly, there were no substantial differences between the separate models for industry and firm-level determinants and a combined one. We found a positive impact of market concentration and market share and a negative effect of age and risk-taking behaviour on a firm profitability. Based on these findings, managers in the Czech food and drink industry should pay more attention to the debt policy.


Keywords


Firm Profitability, Return on Assets (ROA), Industry and Firm Effects, Multilevel Analysis, Czech Food and Drink Industry.

References





DOI: https://doi.org/10.15759/ijek%2F2018%2Fv6i2%2F178167