Determinants of Profitability: An Analysis of Large Australian Firms

Andreas Stierwald
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Andreas Stierwald: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: This paper identifies the determinants of firm profitability and quantifies their relative importance. Using a panel of large Australian firms for the period 1995 to 2005, the analysis estimates a dynamic profit model that, unlike most existing research, directly includes measures of productivity and productivity persistence. Descriptive statistics illustrate that the sample is characterized by a large amount of profit heterogeneity, and that substantial differences exist between industries and across firms. Estimation results indicate that firm profitability is predominantly determined by firm-level characteristics, and that sector effects are relevant, but to a much smaller extent. The analysis also reveals that, among firm effects, productivity and productivity persistence enhance profitability.

Keywords: Firm Performance; Determinants of Profit; Dynamic Panel Bias; Total Factor Productivity (search for similar items in EconPapers)
JEL-codes: C23 D24 L25 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2010-04
New Economics Papers: this item is included in nep-bec and nep-eff
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2010n03

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