Firm‐specific and economy wide determinants of firm profitability

Abstract

Purpose -The purpose of this paper is to examine the determinants of profitability for a sample of Greek non-financial firms listed in the Athens Stock Exchange for the period 1995-2003. This is a very important period for the Greek economy on the way to European monetary union (EMU). Design/methodology/approach -The methodologies employed include panel data estimation techniques. This research attempts to exploit the determinants of firm profitability of non-financial Greek firms listed in Athens Exchange utilizing firm-specific publicly available accounting variables using panel data estimation techniques rather than cross-sectional analysis. Findings -According to the findings, firm profitability was positively affected by size, sales growth and investment and negatively by leverage and current assets. Additionally, we found that the EMU participation and the adoption of the euro were negatively related to firm profitability. Practical implications -Taking into account the fact that the Greek economy has undergone significant transformation during the period under examination on its way to join EMU and to adopt the euro currency, a model has been formulated where both firm-specific and economy wide factors determine firm profitability. Originality/value -This paper focuses on a less developed and efficient stock market. In contrast to previous studies that did not take into account the convergence of the Greek economy to EMU averages and the subsequent adoption of the euro, this paper analyses data for the pre-EMU and the post-EMU periods in an attempt to quantify a potential macroeconomic effect on firm-specific profitability.

Determinants of Profitability: Evidence from Real Sector Firms Listed in Borsa Istanbul

“…In other words, firms having higher level of leverage in both full sample and sub-samples perform worse in terms of profitability. This finding that the leverage is negatively and significantly associated with profitability parallels the findings of Majumdar (1997) for India; Andres (2008) for Germany; Asimakopoulos et al (2009) for Greece; Nunes et al (2009) for Portugal;Pattitoni et al (2014) for the EU-15 countries, Pervan and Mlikota (2013) for Croatia; Miralles-Marcelo et al (2014) for Portugal and Spain; Poutziouris et al (2015) for UK; and Mijić et al (2016) for Serbia; among others.…”

“…Debt structure: As stated by Asimakopoulos et al (2009) and Pervan and Mlikota (2013) a rise in debt ratio causes firms to pay high interest periodically, which results in poorer performance and lower profitability. Consequently, we expect to find a negative linkage between debt structure and profitability.…”

Determinants of Profitability: Evidence from Industrial Companies Listed on Muscat Securities Market

“…On the other hand, lower level of debt and lower level of fixed assets are more profitable for Portuguese service companies. Similar results were obtained by Asimakopoulos, Samitas, and Papadogonas (2009). They tested profitability for non-financial firms listed on Athens stock exchange.…”

Firm Value and External Financing Needs

“…This result similar to results of studies by Coad (2007), Asimakopoulous et al (2009), Kouser et al (2012) ve Rashid (2014. This finding obtained for Turkey supports common results in literature.…”

“…6; profitability is affected by sales growth, investment in fixed assets, managerial efficiency, size, and debt structure. Asimakopoulous et al (2009) determined that large firms have high profit. So, they found positive relationship of size and profitability.…”