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Corporate profitability and the dynamics of competition in emerging markets: a time series analysis

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  • Jack Glen
  • Kevin Lee
  • Ajit Singh

Abstract

The paper presents time-series analyses of corporate profitability in seven leading developing countries (DCs) using the common methodology of the persistence of profitability (PP) studies and systematically compares the results with those for advanced countries (ACs). Surprisingly, both short and long-term persistence of profitability for DCs are found to be lower than those for ACs. The paper concentrates on economic explanations for these findings. It also reports the results on the persistence of the two components of profitability - output-capital ratios and profit margins. These too raise important general issues of economic interpretation for PP studies which are outlined. Copyright 2003 Royal Economic Society.

Suggested Citation

  • Jack Glen & Kevin Lee & Ajit Singh, 2003. "Corporate profitability and the dynamics of competition in emerging markets: a time series analysis," Economic Journal, Royal Economic Society, vol. 113(491), pages 465-484, November.
  • Handle: RePEc:ecj:econjl:v:113:y:2003:i:491:p:f465-f484
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    References listed on IDEAS

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    1. Glen, Jack & Lee, Kevin & Singh, Ajit, 2001. "Persistence of profitability and competition in emerging markets," Economics Letters, Elsevier, vol. 72(2), pages 247-253, August.
    2. Geroski, Paul A & Jacquemin, Alexis, 1988. "The Persistence of Profits: A European Comparison," Economic Journal, Royal Economic Society, vol. 98(391), pages 375-389, June.
    3. Whittington, G & Saporta, V & Singh, A, 1997. "The Effects of Hyper-Inflation on Accounting Ratios. Financing Corporate Growth in Industrial Economies," Papers 3, World Bank - International Finance Corporation.
    4. Mueller,Dennis C., 2009. "Profits in the Long Run," Cambridge Books, Cambridge University Press, number 9780521101592.
    5. Singh, Ajit & Weisse, Bruce, 1998. "The Asian model: a crisis foretold," MPRA Paper 54002, University Library of Munich, Germany.
    6. Reder, Melvin W, 1982. "Chicago Economics: Permanence and Change," Journal of Economic Literature, American Economic Association, vol. 20(1), pages 1-38, March.
    7. Ajit Singh, 2006. "Competition and Competition Policy in Emerging Markets: International and Developmental Dimensions," Chapters,in: Growth and Economic Development, chapter 12 Edward Elgar Publishing.
    8. Amsden, Alice H. & Singh, Ajit, 1994. "The optimal degree of competition and dynamic efficiency in Japan and Korea," European Economic Review, Elsevier, vol. 38(3-4), pages 941-951, April.
    9. Patterson, K. D., 2000. "Bias reduction in autoregressive models," Economics Letters, Elsevier, vol. 68(2), pages 135-141, August.
    10. Cubbin, John & Geroski, Paul A, 1987. "The Convergence of Profits in the Long Run: Inter-firm and Inter-industry Comparisons," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 427-442, June.
    11. Singh, A. & Hamid, J., 1992. "Corporate Financial Structure in Developing Countries," Papers 1, World Bank - International Finance Corporation.
    12. Asplund, Björn Marcus & Nocke, Volker, 2000. "Imperfect Competition, Market Size and Firm Turnover," CEPR Discussion Papers 2625, C.E.P.R. Discussion Papers.
    13. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    14. B. Burcin Yurtoglu, 2004. "Persistence of firm-level profitability in Turkey," Applied Economics, Taylor & Francis Journals, vol. 36(6), pages 615-625.
    15. Singh, Ajit, 1994. "Corporate financial patterns in industrialising economies: a comparative international study," MPRA Paper 54936, University Library of Munich, Germany.
    16. Geroski, Paul A & Machin, Stephen & Walters, Christopher F, 1997. "Corporate Growth and Profitability," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 171-189, June.
    17. Waring, Geoffrey F, 1996. "Industry Differences in the Persistence of Firm-Specific Returns," American Economic Review, American Economic Association, vol. 86(5), pages 1253-1265, December.
    18. Goddard, J. A. & Wilson, J. O. S., 1999. "The persistence of profit: a new empirical interpretation," International Journal of Industrial Organization, Elsevier, vol. 17(5), pages 663-687, July.
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    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • F02 - International Economics - - General - - - International Economic Order and Integration

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