Looking beyond the Numbers: Determinants of Financial Performance of Portuguese Wine Firms

This chapter focuses on the analysis of the determinants of financial performance (FP) of Portuguese wine firms. Unbalanced panel data were analyzed using fixed-effects regression. The sample consisted of 386 Portuguese wine firms, for the period 2014-2017. FP is the dependent variable of this study, having been measured through return on assets (ROA) using as explanatory variables debt-to-equity, net working capital, current ratio, days payable out-standing (DPO), and days receivables outstanding (DRO). The results show: (1) DRO, debt-to-equity and net working capital are the variables that best explain the FP measured by ROA; (2) Debt-to-equity and DRO have a negative relationship with ROA, whereas current ratio, working capital, and DPO have a positive relationship with profitability measured by ROA. The findings suggest that there are other qualitative elements in the wine sector, beyond numbers, that support the explanation of its performance. The way this industry is heavily controlled affects its success. Furthermore, factors such as the style of corporate governance and the lengthy production cycle can have a significant impact on its FP. it is strongly advised that qualitative approaches be employed in conjunction with quantitative research in future studies to obtain the most comprehensive and accurate results.