Productivity, profitability and financial performance

Giulio Bottazzi, Angelo Secchi and Federico Tamagni

Industrial and Corporate Change, 2008, vol. 17, issue 4, 711-751

Abstract: This work presents a comparative analysis of two crucial dimensions of firms’ performance: profitability and productivity. The characteristics of their empirical distribution and the associated degree of persistence over time are explored through a set of parametric and non-parametric exercises performed on an exhaustive panel of Italian firms, active in both manufacturing and services, during the period 1998–2003. The main strength of our analysis resides in the use of a credit rating index which allows us to document not obvious interactions which are in place among economic performances, financial conditions and access to external credit. We also investigate how profitability and productivity relates with a third important dimension of performance, that is growth. We find that, independently from the particular sector of activity and from financial conditions, there seems to be weak market pressure and little behavioral inclination for the more efficient and more profitable firms to grow faster. Copyright 2008 , Oxford University Press.

Date: 2008
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Working Paper: Productivity, Profitability and Financial Fragility: Evidence from Italian Business Firms (2006)
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