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The Determinants of Firm Profitability in Australian Manufacturing

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  • McDonald, James Ted

Abstract

This study provides new evidence on the determinants of the profitability of Australian manufacturing firms by analyzing a unique firm-level data set of firm performance over the period 1984-93. The panel nature of the data permits the estimation of dynamic profitability models over the business cycle to test both the persistence and cyclicality of firm profitability. Econometric results suggest that lagged profitability is a significant determinant of current profit margins and that industry concentration is positively related to firm profit margins. Also, profit margins are found to be procyclical in concentrated industries but counter-cyclical in less concentrated industries. Copyright 1999 by The Economic Society of Australia.

Suggested Citation

  • McDonald, James Ted, 1999. "The Determinants of Firm Profitability in Australian Manufacturing," The Economic Record, The Economic Society of Australia, vol. 75(229), pages 115-126, June.
  • Handle: RePEc:bla:ecorec:v:75:y:1999:i:229:p:115-26
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    References listed on IDEAS

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    10. Frank, Murray & Jagannathan, Ravi, 1998. "Why do stock prices drop by less than the value of the dividend? Evidence from a country without taxes," Journal of Financial Economics, Elsevier, vol. 47(2), pages 161-188, February.
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    Citations

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    Cited by:

    1. Simon Feeny, 2000. "Determinants of Profitability: An Empirical Investigation Using Australian Tax Entities," Melbourne Institute Working Paper Series wp2000n01, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    2. Warren, Paul, 2005. "Rentabilite des entreprises sous controle canadien par rapport aux entreprises sous controle americain," Serie de documents de recherche sur l'analyse economique (AE) 2005030f, Statistics Canada, Direction des etudes analytiques.
    3. David Norman & Anthony Richards, 2012. "The Forecasting Performance of Single Equation Models of Inflation," The Economic Record, The Economic Society of Australia, vol. 88(280), pages 64-78, March.
    4. Laurent Maurin & Moreno Roma & Igor Vetlov, 2011. "Profit Dynamics across the Largest Euro Area countries and Sectors," Bank of Lithuania Working Paper Series 12, Bank of Lithuania.
    5. Mita Bhattacharya, 2002. "Group Profit, Market Share and Efficiency: Evidence from Australian Manufacturing," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(2), pages 187-199, March.
    6. Ashwin Madhou & Imad Moosa & Vikash Ramiah, 2015. "Working Capital as a Determinant of Corporate Profitability," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 18(04), pages 1-17, December.
    7. Nina Ponikvar & Maks Tajnikar, 2011. "Are the Determinants of Markup Size Industry-Specific? The Case of Slovenian Manufacturing Firms," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(2), pages 229-244, June.
    8. Warren, Paul, 2005. "Profitability of Canadian- Versus U.S.-controlled Enterprises," Economic Analysis (EA) Research Paper Series 2005030e, Statistics Canada, Analytical Studies Branch.
    9. Tamminen, Saara & Han-Hsin Chang, 2012. "Company heterogeneity and mark-up variability," Working Papers 32, Government Institute for Economic Research Finland (VATT).
    10. Simon Feeny & Mark Harris & Mark Rogers, 2005. "A dynamic panel analysis of the profitability of Australian tax entities," Empirical Economics, Springer, pages 209-233.
    11. Sebastian LAZAR, 2016. "Determinants Of Firm Performance: Evidence From Romanian Listed Companies," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 17, pages 53-69, June.
    12. Edwards, Seanicaa & Allen, Albert J. & Shaik, Saleem, 2006. "Market Structure Conduct Performance (SCP) Hypothesis Revisited using Stochastic Frontier Efficiency Analysis," 2006 Annual meeting, July 23-26, Long Beach, CA 21350, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Harry Bloch & James McDonald, 2001. "Import Competition and Labor Productivity," Journal of Industry, Competition and Trade, Springer, vol. 1(3), pages 301-319, September.
    14. Mark Rogers, 2001. "The Effect of Diversification on Firm Performance," Melbourne Institute Working Paper Series wp2001n02, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    15. Basant, Rakesh & Mishra, Pulak, 2017. "Vertical Integration, Market Structure and Competition Policy: Experiences of Indian Manufacturing Sector during the Post Reform Period," IIMA Working Papers WP 2017-09-02, Indian Institute of Management Ahmedabad, Research and Publication Department.
    16. repec:kap:sbusec:v:48:y:2017:i:3:d:10.1007_s11187-016-9802-1 is not listed on IDEAS
    17. James McDonald & Harry Bloch, 1999. "The Spillover Effects of Industrial Action on Firm Profitability," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(2), pages 183-200, September.
    18. Patrice Laroche & Hristos Doucouliagos, 2009. "Unions and Profits: A meta-regression Analysis," Post-Print hal-00648569, HAL.

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