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Persistence and Determinants of Firm Profit in Emerging Markets

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  • Andreas Stephan
  • Andriy Tsapin

Abstract

The paper studies the persistence of profit and its determinants in emerging markets. We apply Markov chain analysis, dynamic panel GMM estimation, and quantile regression techniques to a panel of approximately 3,000 Ukrainian companies. The empirical results show a moderate level of profit persistence, as well as a relatively low speed of adjustment to the steady-state profit level, thus providing no support for the hypothesis that there is a lower persistence of profits in emerging markets due to more intense competition. Regarding the determinants of firm profit in an emerging market economy, the findings from alternative methods reveal that ownership structure and regional location of the firm have a significant impact.

Suggested Citation

  • Andreas Stephan & Andriy Tsapin, 2008. "Persistence and Determinants of Firm Profit in Emerging Markets," Discussion Papers of DIW Berlin 848, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp848
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    Cited by:

    1. Asongu, Simplice & Uduji, Joseph & Okolo-Obasi, Elda, 2020. "Political instability and political terror: global evidence on persistence," MPRA Paper 103147, University Library of Munich, Germany.
    2. Canarella, Giorgio & Miller, Stephen M. & Nourayi, Mahmoud M., 2013. "Firm profitability: Mean-reverting or random-walk behavior?," Journal of Economics and Business, Elsevier, vol. 66(C), pages 76-97.
    3. Trofimov, Ivan D., 2018. "Industry rates of return in Korea and alternative theories of competition: equalising convergence versus tendential equalisation," MPRA Paper 88390, University Library of Munich, Germany.
    4. Asongu, Simplice & Acha-Anyi, Paul, 2017. "The Murder Epidemic: A Global Comparative Study," MPRA Paper 85486, University Library of Munich, Germany, revised Jan 2018.
    5. Simplice A. Asongu & Joseph I. Uduji & Elda N. Okolo-Obasi, 2020. "Drivers and persistence of death in conflicts: global evidence," Working Papers 20/066, European Xtramile Centre of African Studies (EXCAS).
    6. Simplice A. Asongu & Joseph Nnanna, 2019. "Dynamic Determinants of Access to Weapons: Global Evidence," Foreign Trade Review, , vol. 54(4), pages 334-354, November.
    7. Pradeep Kumar Keshari, 2011. "Efficiency Spillovers from FDI in the Indian Machinery Industry: A Firm Level Study Using Panel Data Models," Working Papers id:4195, eSocialSciences.
    8. Asongu, Simplice, 2017. "Persistence in Incarcerations: Global Comparative Evidence," MPRA Paper 85483, University Library of Munich, Germany.
    9. Simplice A. Asongu & Joseph I. Uduji & Elda N. Okolo-Obasi, 2019. "The Persistence of Weapons: Global Evidence," Working Papers of the African Governance and Development Institute. 19/068, African Governance and Development Institute..
    10. Simplice A. Asongu, 2019. "The persistence of global terrorism," Working Papers of the African Governance and Development Institute. 19/053, African Governance and Development Institute..
    11. Simplice A. Asongu & Nicholas M. Odhiambo, 2019. "The sustainability of tourism: global comparative evidence," Working Papers of the African Governance and Development Institute. 19/094, African Governance and Development Institute..
    12. Diagne, Youssoupha S & Sène, Serigne Moustapha, 2009. "La profitabilité des secteurs de l’économie sénégalaise [Profitability of economic sectors in Senegal]," MPRA Paper 54921, University Library of Munich, Germany.
    13. Goddard, John & Liu, Hong & Molyneux, Philip & Wilson, John O.S., 2011. "The persistence of bank profit," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2881-2890, November.
    14. Simplice A. Asongu & Joseph Nnanna, 2019. "Determinants of Access to Weapons: Global Evidence," CEREDEC Working Papers 19/008, Centre de Recherche pour le Développement Economique (CEREDEC).
    15. Stephan, Andreas & Tsapin, Andriy & Talavera, Oleksandr, 2009. "Why Do Firms Switch Their Main Bank? - theory and evidence from Ukraine," Working Paper Series in Economics and Institutions of Innovation 180, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    16. Mohammed Amidu & Simon K. Harvey, 2016. "The persistence of profits of banks in Africa," Review of Quantitative Finance and Accounting, Springer, vol. 47(1), pages 83-108, July.
    17. Zhang, Qun & Zhang, Peihui & Liu, Hao, 2023. "Does expected idiosyncratic skewness of firms' profit predict the cross-section of stock returns? Evidence from China," Research in International Business and Finance, Elsevier, vol. 64(C).
    18. Stefan Hirsch, 2018. "Successful In The Long Run: A Meta†Regression Analysis Of Persistent Firm Profits," Journal of Economic Surveys, Wiley Blackwell, vol. 32(1), pages 23-49, February.
    19. Philip Kofi Adom & Franklin Amuakwa-Mensah & Salome Amuakwa-Mensah, 2020. "Degree of financialization and energy efficiency in Sub-Saharan Africa: do institutions matter?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-22, December.
    20. Diem Nguyen & Vicki McCracken & Ken Casavant & Eric Jessup, 2011. "Geographic location, ownership and profitability of Washington log trucking companies," Regional Science Policy & Practice, Wiley Blackwell, vol. 3(2), pages 115-125, June.
    21. Christa Sys, 2013. "Persistence of profits in the container liner shipping industry," Chapters, in: Thomas Vanoutrive & Ann Verhetsel (ed.), Smart Transport Networks, chapter 6, pages 99-125, Edward Elgar Publishing.

    More about this item

    Keywords

    Profit; Persistence; Convergence; Markov chain analysis; Ukraine;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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