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Dynamic and Static Decomposition Analysis of the Czech Automotive Production Sector

Author

Listed:
  • Dana Dluhosova
  • Karolina Lisztwanova
  • Antonín Poncik
  • Iveta Ratmanová
  • Zdenek Zmeskal

Abstract

Purpose: The objective of the paper is to analyse financial performance through the economic value added (EVA) measure of the Czech automotive production sector, NACE 29, in the years 2015-2019, using dynamic and static decomposition methods. Design/Methodology/Approach: The applied methods are as follows: literature review, economic value-added measure formulation, pyramid decomposition, static decomposition deviation analysis, and dynamic decomposition deviation analysis due to variance analysis. Findings: The static analysis results showed the non-stability of the crucial influential factors in both absolute and relative EVA measures. Dynamic decomposition analysis can reveal fundamental ratios influencing the EVA measure dynamically in state span. It was verified that the functional decomposition method is suitable for static analysis modelling positive and negative ratio deviations. The dynamic decomposition analysis based on the variance analysis method is appropriate for problem modelling. It was found that the Czech automotive sector is declining in relative EVA measures. Practical Implications: Knowing the ranking and volume of influential financial factors of financial performance allows one to manage operational and strategic objectives successfully. Declining relative EVA measures, even if positive, reveal the necessity to correct and improve the management, financial and business model. Originality/Value: The study contributes to the analysis of crucial sectors of the Czech economy, and the dynamic aspect is investigated as well. The findings can provide a better understanding of the development of the automotive production sector. Furthermore, crucial financial ratios are defined for managerial decision-making.

Suggested Citation

  • Dana Dluhosova & Karolina Lisztwanova & Antonín Poncik & Iveta Ratmanová & Zdenek Zmeskal, 2022. "Dynamic and Static Decomposition Analysis of the Czech Automotive Production Sector," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 84-95.
    • Handle: RePEc:ers:journl:v:xxv:y:2022:i:3:p:84-95
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic value-added; automotive sector; functional decomposition method; dynamic decomposition analysis; variance analysis.;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G3 - Financial Economics - - Corporate Finance and Governance

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