Industry, firm, year, and country effects on profitability: Evidence from a large sample of EU food processing firms
AbstractThis 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 InfoPaper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49322.
Date of creation: 2009
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variance components; abnormal profit; EU-27; MBV; RBV; comparative advantage; Agribusiness; Agricultural Finance; Financial Economics; Industrial Organization; Marketing;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-05-16 (All new papers)
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