Financial Determinants of Firms Profitability: A Hazard Function Investigation

Corrado Di Guilmi

No 315, Working Papers from Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali

Abstract: In this paper a hazard function analysis is performed on a set of European firms in order to identify a stochastic relationship among financial structure and profits. The relative proportions of debt and equity financing appear to influence expected profitability with a different degree for each nation. Within each country, relevant differences are recorded among listed and non listed firms. These results highlight the role of institutional factors, in particular related to credit and stock markets, in reducing informational asymmetries between investors and managers. The cross-sectional study is performed by means of degradation analysis, an engineering tool new in economics.

Keywords: asymmetric information; hazard function; pecking order theory (search for similar items in EconPapers)
JEL-codes: C40 G32 (search for similar items in EconPapers)
Pages: 17
Date: 2008-03
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Citations: View citations in EconPapers (11)

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