Determinants of firm profitability in the Croatian manufacturing industry: evidence from dynamic panel analysis

Maja Pervan, Ivica Pervan and Marijana Ćurak

Economic Research-Ekonomska Istraživanja, 2019, vol. 32, issue 1, 968-981

Abstract: Given that the goal of this study was to examine the influence of different factors on a firm’s profitability, we designed a model with three categories of profitability determinants: firm-specific, industry-specific and macroeconomic. The analysis was performed on 9359 firms operating in the Croatian manufacturing industry during the 2006–2015 period. Since the designed model was formulated in a way that encompasses the dynamic aspect of profitability, the General Method of Moments (G.M.M.) dynamic panel estimator was applied. Formulation of such a model adds to the existing literature if one takes into account that a dynamic analysis of the drivers of profitability has not been done using data from the Croatian manufacturing sector. The results of the conducted analysis revealed that a firm’s age, labour cost and industry concentration, as well as G.D.P. growth and inflation, have significant influence on a firm’s profitability.

Date: 2019
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DOI: 10.1080/1331677X.2019.1583587

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