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Industry, firm, year, and country effects on profitability: Evidence from a large sample of EU food processing firms

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  • Schiefer, Jan
  • Hartmann, Monika
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    Abstract

    This paper analyzes the variance in accounting profitability within the European food industry. Based on a large panel data set, the variance in return on assets (ROA) is decomposed into year, country, industry, and firm effects. Further on, we include all possible interactions between year, country, and industry and discuss the theoretical foundations for these effects. After singling out the significant effect classes in a nested ANOVA with a thoroughly designed rotation regarding the order of effect introduction, we determine effect magnitude using components of variance (COV). Our results show that firm characteristics seem to be far more important than industry structure in determining the level of economic return within the food industry. Year and country effects, as well as their interactions were weak or insignificant, indicating that macroeconomics and trade theory offer little potential to serve as a basis for the explanation of performance differentials. While neither national nor industry-specific cycles were significant, EU-wide fluctuations significantly contributed to explaining differences in performance, suggesting that economic cycles in the EU are by and large synchronized.

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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49322.

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    Date of creation: 2009
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    Handle: RePEc:ags:aaea09:49322

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    Related research

    Keywords: variance components; abnormal profit; EU-27; MBV; RBV; comparative advantage; Agribusiness; Agricultural Finance; Financial Economics; Industrial Organization; Marketing;

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    1. Mike Artis & Hans-Martin Krolzig & Juan Toro, 2002. "The European Business Cycle," Economic Working Papers at Centro de Estudios Andaluces E2002/19, Centro de Estudios Andaluces.
    2. Andrzej Szymanski & Matthew Gorton & Lionel Hubbard, 2007. "A Comparative Analysis of Firm Performance in Post-socialist Economies: Evidence from the Polish Food Processing Industry," Post-Communist Economies, Taylor & Francis Journals, vol. 19(4), pages 433-448.
    3. Ramos, Raul & Clar, Miquel & Surinach, Jordi, 2003. "National versus sectoral shocks: new evidence for the manufacturing sector in European countries," Economics Letters, Elsevier, vol. 78(2), pages 241-245, February.
    4. Todd E. Clark & Eric van Wincoop, 1999. "Borders and business cycles," Research Working Paper 99-07, Federal Reserve Bank of Kansas City.
    5. Schmalensee, Richard, 1985. "Do Markets Differ Much?," American Economic Review, American Economic Association, vol. 75(3), pages 341-51, June.
    6. Gabriel Hawawini & Venkat Subramanian & Paul Verdin, 2004. "The home country in the age of globalization: how much does it matter for firm performance?," ULB Institutional Repository 2013/14190, ULB -- Universite Libre de Bruxelles.
    7. André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
    8. Sara Schumacher & Michael Boland, 2005. "The effects of industry and firm resources on profitability in the food economy," Agribusiness, John Wiley & Sons, Ltd., vol. 21(1), pages 97-108.
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