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

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Author Info
Jack Glen
Kevin Lee
Ajit Singh

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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.

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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 113 (2003)
Issue (Month): 491 (November)
Pages: F465-F484
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Handle: RePEc:ecj:econjl:v:113:y:2003:i:491:p:f465-f484

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ajit SINGH, 2002. "Competition And Competition Policy In Emerging Markets: International And Developmental Dimensions," G-24 Discussion Papers 18, United Nations Conference on Trade and Development. [Downloadable!]
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  2. Kambhampati, U S, 1995. "The Persistence of Profit Differentials in Indian Industry," Applied Economics, Taylor and Francis Journals, vol. 27(4), pages 353-61, April.
  3. Jack D. Glen & Ajit Singh & Rudolph Matthias, 1999. "How Intensive Is Competition in the Emerging Markets? An Analysis of Corporate Rates of Return from Nine Emerging Markets," IMF Working Papers 99/32, International Monetary Fund.
  4. Reder, Melvin W, 1982. "Chicago Economics: Permanence and Change," Journal of Economic Literature, American Economic Association, vol. 20(1), pages 1-38, March. [Downloadable!] (restricted)
  5. Patterson, K. D., 2000. "Bias reduction in autoregressive models," Economics Letters, Elsevier, vol. 68(2), pages 135-141, August. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
  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, Blackwell Publishing, vol. 35(4), pages 427-42, June. [Downloadable!] (restricted)
  9. Geroski, Paul A & Machin, Stephen & Walters, Christopher F, 1997. "Corporate Growth and Profitability," Journal of Industrial Economics, Blackwell Publishing, vol. 45(2), pages 171-89, June. [Downloadable!] (restricted)
  10. Waring, Geoffrey F, 1996. "Industry Differences in the Persistence of Firm-Specific Returns," American Economic Review, American Economic Association, vol. 86(5), pages 1253-65, December. [Downloadable!] (restricted)
  11. Singh, A. & Hamid, J., 1992. "Corporate Financial Structure in Developing Countries," Papers 1, World Bank - International Finance Corporation.
  12. Asplund, Björn Marcus & Nocke, Volker, 2000. "Imperfect Competition, Market Size and Firm Turnover," CEPR Discussion Papers 2625, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  13. Singh, A., 1995. "Corporate Financial Patterns in Industrializing Economies. A Coparative International Study," Papers 2, World Bank - International Finance Corporation.
  14. Geroski, Paul A & Jacquemin, Alexis, 1988. "The Persistence of Profits: A European Comparison," Economic Journal, Royal Economic Society, vol. 98(391), pages 375-89, June. [Downloadable!] (restricted)
  15. B. Burcin Yurtoglu, 2004. "Persistence of firm-level profitability in Turkey," Applied Economics, Taylor and Francis Journals, vol. 36(6), pages 615-625, April. [Downloadable!] (restricted)
  16. 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. [Downloadable!] (restricted)
  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. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. John Goddard & David McMillan & John O. S. 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 and Francis Journals, vol. 38(3), pages 267-278, February. [Downloadable!] (restricted)
  2. William Milberg, 2007. "Shifting Sources and Uses of Profits: Sustaining U.S. Financialization with Global Value Chains," SCEPA Working Papers 2007-9, Schwartz Center for Economic Policy Analysis (SCEPA), The New School. [Downloadable!]
  3. Ajit Singh, 2002. "Competition and competition policy in emerging markets: international and developmental dimensions," ESRC Centre for Business Research - Working Papers wp246, ESRC Centre for Business Research. [Downloadable!]
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  4. Ajit Singh & Ann Zammit, 2006. "Corporate Governance, Crony capitalism and Economic Crisis: Should the US Business Model replace the Asian Way of 'Doing Business'?," ESRC Centre for Business Research - Working Papers wp329, ESRC Centre for Business Research. [Downloadable!]
    Other versions:
  5. Ajit Singh, 2002. "Competition, corporate governance and selection in emerging markets," ESRC Centre for Business Research - Working Papers wp247, ESRC Centre for Business Research. [Downloadable!]
    Other versions:
  6. Jack Glen & Ajit Singh, 2004. "Corporate Governance, Competition And Finance: Re-Thinking Lessons From The Asian Crisis," ESRC Centre for Business Research - Working Papers wp288, ESRC Centre for Business Research. [Downloadable!]
    Other versions:
  7. 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. [Downloadable!]
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