IDEAS home Printed from https://ideas.repec.org/a/ecj/econjl/v113y2003i491pf465-f484.html
   My bibliography  Save this article

Corporate profitability and the dynamics of competition in emerging markets: a time series analysis

Author

Listed:
  • Jack Glen
  • Kevin Lee
  • Ajit Singh

Abstract

The paper presents time-series analyses of corporate profitability in seven leading developing countries (DCs) using the common methodology of the persistence of profitability (PP) studies and systematically compares the results with those for advanced countries (ACs). Surprisingly, both short and long-term persistence of profitability for DCs are found to be lower than those for ACs. The paper concentrates on economic explanations for these findings. It also reports the results on the persistence of the two components of profitability - output-capital ratios and profit margins. These too raise important general issues of economic interpretation for PP studies which are outlined. Copyright 2003 Royal Economic Society.

Suggested Citation

  • Jack Glen & Kevin Lee & Ajit Singh, 2003. "Corporate profitability and the dynamics of competition in emerging markets: a time series analysis," Economic Journal, Royal Economic Society, vol. 113(491), pages 465-484, November.
    • Handle: RePEc:ecj:econjl:v:113:y:2003:i:491:p:f465-f484
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. James R. Tybout, 2000. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 11-44, March.
    2. Anita M. McGahan & Michael E. Porter, 1999. "The Persistence of Shocks to Profitability," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 143-153, February.
    3. Geroski, Paul A & Jacquemin, Alexis, 1988. "The Persistence of Profits: A European Comparison," Economic Journal, Royal Economic Society, vol. 98(391), pages 375-389, June.
    4. Paul A. Geroski & Stephen J. Machin & Christopher F. Walters, 1997. "Corporate Growth and Profitability," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 171-189, June.
    5. Reder, Melvin W, 1982. "Chicago Economics: Permanence and Change," Journal of Economic Literature, American Economic Association, vol. 20(1), pages 1-38, March.
    6. Ajit Singh, 2006. "Competition and Competition Policy in Emerging Markets: International and Developmental Dimensions," Chapters, in: Philip Arestis & John S.L. McCombie & Roger Vickerman (ed.), Growth and Economic Development, chapter 12, Edward Elgar Publishing.
    7. Ajit Singh, 2003. "Competition, corporate governance and selection in emerging markets," Economic Journal, Royal Economic Society, vol. 113(491), pages 443-464, November.
    8. Cubbin, John & Geroski, Paul A, 1987. "The Convergence of Profits in the Long Run: Inter-firm and Inter-industry Comparisons," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 427-442, June.
    9. Nocke, Volker & Asplund, Björn Marcus, 2000. "Imperfect Competition, Market Size and Firm Turnover," CEPR Discussion Papers 2625, C.E.P.R. Discussion Papers.
    10. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    11. Mueller,Dennis C., 2009. "Profits in the Long Run," Cambridge Books, Cambridge University Press, number 9780521101592.
    12. Singh, Ajit, 1998. "The Asian Model: A Crisis Foretold?," MPRA Paper 24683, University Library of Munich, Germany.
    13. Geroski, Paul A & Machin, Stephen & Walters, Christopher F, 1997. "Corporate Growth and Profitability," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 171-189, June.
    14. Singh, Ajit, 1994. "Corporate financial patterns in industrialising economies: a comparative international study," MPRA Paper 54936, University Library of Munich, Germany.
    15. Goddard, J. A. & Wilson, J. O. S., 1999. "The persistence of profit: a new empirical interpretation," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 663-687, July.
    16. Glen, Jack & Lee, Kevin & Singh, Ajit, 2001. "Persistence of profitability and competition in emerging markets," Economics Letters, Elsevier, vol. 72(2), pages 247-253, August.
    17. Whittington, G & Saporta, V & Singh, A, 1997. "The Effects of Hyper-Inflation on Accounting Ratios. Financing Corporate Growth in Industrial Economies," Papers 3, World Bank - International Finance Corporation.
    18. Amsden, Alice H. & Singh, Ajit, 1994. "The optimal degree of competition and dynamic efficiency in Japan and Korea," European Economic Review, Elsevier, vol. 38(3-4), pages 941-951, April.
    19. Patterson, K. D., 2000. "Bias reduction in autoregressive models," Economics Letters, Elsevier, vol. 68(2), pages 135-141, August.
    20. Singh, A. & Hamid, J., 1992. "Corporate Financial Structure in Developing Countries," Papers 1, World Bank - International Finance Corporation.
    21. B. Burcin Yurtoglu, 2004. "Persistence of firm-level profitability in Turkey," Applied Economics, Taylor & Francis Journals, vol. 36(6), pages 615-625.
    22. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-1150, September.
    23. Odagiri, Hiroyuki, 1994. "Growth through Competition, Competition through Growth: Strategic Management and the Economy in Japan," OUP Catalogue, Oxford University Press, number 9780198288732.
    24. Waring, Geoffrey F, 1996. "Industry Differences in the Persistence of Firm-Specific Returns," American Economic Review, American Economic Association, vol. 86(5), pages 1253-1265, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Singh, Ajit & Singh, Alaka & Weisse, Bruce, 2002. "Corporate Governance, Competetion, The new International Financial Architecture and Large Corporations in Emerging Markets," MPRA Paper 24305, University Library of Munich, Germany.
    2. John Goddard & David McMillan & John Wilson, 2006. "Do firm sizes and profit rates converge? Evidence on Gibrat's Law and the persistence of profits in the long run," Applied Economics, Taylor & Francis Journals, vol. 38(3), pages 267-278.
    3. Ajit Singh & Ann Zammit, 2006. "Corporate Governance, Crony Capitalism and Economic Crises: should the US business model replace the Asian way of “doing business”?," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(4), pages 220-233, July.
    4. Ajit Singh, 2006. "Competition and Competition Policy in Emerging Markets: International and Developmental Dimensions," Chapters, in: Philip Arestis & John S.L. McCombie & Roger Vickerman (ed.), Growth and Economic Development, chapter 12, Edward Elgar Publishing.
    5. Ajit Singh, 2003. "Competition, corporate governance and selection in emerging markets," Economic Journal, Royal Economic Society, vol. 113(491), pages 443-464, November.
    6. Jesus Crespo Cuaresma & Adelina Gschwandtner, 2006. "The competitive environment hypothesis revisited: non-linearity, nonstationarity and profit persistence," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 465-472.
    7. Christa Sys, 2013. "Persistence of profits in the container liner shipping industry," Chapters, in: Thomas Vanoutrive & Ann Verhetsel (ed.), Smart Transport Networks, chapter 6, pages 99-125, Edward Elgar Publishing.
    8. Johan E. Eklund & Emma Lappi, 2019. "Persistence of profits in the EU: how competitive are EU member countries?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(2), pages 327-351, May.
    9. Adelina Gschwandtner, 2005. "Profit persistence in the 'very' long run: evidence from survivors and exiters," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 793-806.
    10. Kaplan, Muhittin & Aslan, Alper, 2006. "Persistence of Profitability and the Dynamics of Competition in Turkey, 1985-2004," MPRA Paper 10602, University Library of Munich, Germany.
    11. Adelina Gschwandtner, 2004. "Evolution of Profit Persistence in the US: Evidence from four 20-years periods," Vienna Economics Papers vie0410, University of Vienna, Department of Economics.
    12. Tammy L. Madsen & Gordon Walker, 2017. "Competitive heterogeneity, cohorts, and persistent advantage," Strategic Management Journal, Wiley Blackwell, vol. 38(2), pages 184-202, February.
    13. Glen, Jack & Lee, Kevin & Singh, Ajit, 2000. "Competition, corporate governance and financing of corporate growth in emerging markets," MPRA Paper 53625, University Library of Munich, Germany.
    14. Stefan Hirsch & Monika Hartmann, 2014. "Persistence of firm-level profitability in the European dairy processing industry," Agricultural Economics, International Association of Agricultural Economists, vol. 45(S1), pages 53-63, November.
    15. Riadh BEN JELILI, 2001. "Persistence of Profitability and Intensity of Competition in Tunisian Manufacturing Sectors," Middle East and North Africa 330400010, EcoMod.
    16. Tammy L. Madsen & Michael J. Leiblein, 2015. "What Factors Affect the Persistence of an Innovation Advantage?," Journal of Management Studies, Wiley Blackwell, vol. 52(8), pages 1097-1127, December.
    17. Sameeksha Desai & Johan E. Eklund & Emma Lappi, 2020. "Entry Regulation and Persistence of Profits in Incumbent Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 537-558, November.
    18. Canarella, Giorgio & Miller, Stephen M. & Nourayi, Mahmoud M., 2013. "Firm profitability: Mean-reverting or random-walk behavior?," Journal of Economics and Business, Elsevier, vol. 66(C), pages 76-97.
    19. Zeren, Feyyaz & Öztürk, Erkan, 2015. "Testing For Profit Persistence Of Listed Manufacturing Companies In Istanbul Stock Exchange," Ekonomika, Journal for Economic Theory and Practice and Social Issues, Society of Economists Ekonomika, Nis, Serbia, vol. 61(2), pages 1-10, June.
    20. Hsu, Bo-Xiang & Chen, Yi-Min & Yan, Ting-Yu, 2021. "Industrial targeting and firm performance: An integrated approach to industry selection," Technological Forecasting and Social Change, Elsevier, vol. 162(C).

    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • F02 - International Economics - - General - - - International Economic Order and Integration

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecj:econjl:v:113:y:2003:i:491:p:f465-f484. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley-Blackwell Digital Licensing or Christopher F. Baum (email available below). General contact details of provider: https://edirc.repec.org/data/resssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.