IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2021i24p13544-d697039.html
   My bibliography  Save this article

Profitability Determinants of Unlisted Renewable Energy Companies in Germany—A Longitudinal Analysis of Financial Accounts

Author

Listed:
  • Maria-Kristiine Luts

    (School of Business and Management, LUT-University, Yliopistonkatu 34, 53850 Lappeenranta, Finland)

  • Jyrki Savolainen

    (School of Business and Management, LUT-University, Yliopistonkatu 34, 53850 Lappeenranta, Finland)

  • Mikael Collan

    (School of Business and Management, LUT-University, Yliopistonkatu 34, 53850 Lappeenranta, Finland
    VATT Institute for Economic Research, Arkadiankatu 7, 00101 Helsinki, Finland)

Abstract

The fight against a climate crisis has urged nations and the global community to cut emissions and to define ambitious environmental goals. This has highlighted the importance of the renewable energy (RE) industry. Germany has been one of the most active countries in RE adoption. In this vein, the purpose of this research is to study and identify key profitability determinants of unlisted German electricity-producing RE-companies, many of which have been supported by the German Feed-in Tariff (FIT). A multi-year analysis based on panel data from 783 companies for the years 2010–2018 is used. The results show that both company- and industry-specific profitability determinants are statistically significant, but the company-specific determinants seem to be more important. The results shed new light on what drives the profitability of private German RE companies during the period of financial aid from the government and are of use to managers, regulators and investors alike, e.g., when the effects of different regulatory climates and industry environments, as well as states of business life cycle are considered. Furthermore, the implications of this study have wider environmental and economic importance as the performance of the RE companies is critical in achieving the emission targets of the energy industry and ensuring a more sustainable energy production for the future.

Suggested Citation

  • Maria-Kristiine Luts & Jyrki Savolainen & Mikael Collan, 2021. "Profitability Determinants of Unlisted Renewable Energy Companies in Germany—A Longitudinal Analysis of Financial Accounts," Sustainability, MDPI, vol. 13(24), pages 1-18, December.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:24:p:13544-:d:697039
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/24/13544/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/24/13544/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gupta, Kartick, 2017. "Do economic and societal factors influence the financial performance of alternative energy firms?," Energy Economics, Elsevier, vol. 65(C), pages 172-182.
    2. repec:cup:cbooks:9781107034662 is not listed on IDEAS
    3. Shah, Imran Hussain & Hiles, Charlie & Morley, Bruce, 2018. "How do oil prices, macroeconomic factors and policies affect the market for renewable energy?," Applied Energy, Elsevier, vol. 215(C), pages 87-97.
    4. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-1398, November.
    5. Ron Adner & Constance E. Helfat, 2003. "Corporate effects and dynamic managerial capabilities," Strategic Management Journal, Wiley Blackwell, vol. 24(10), pages 1011-1025, October.
    6. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    7. Patricia Milanés-Montero & Alberto Arroyo-Farrona & Esteban Pérez-Calderón, 2018. "Assessment of the Influence of Feed-In Tariffs on the Profitability of European Photovoltaic Companies," Sustainability, MDPI, vol. 10(10), pages 1-16, September.
    8. ANITA M. McGAHAN & MICHAEL E. PORTER, 1997. "How Much Does Industry Matter, Really?," Strategic Management Journal, Wiley Blackwell, vol. 18(S1), pages 15-30, July.
    9. Maria Elisabete Neves & Carla Henriques & João Vilas, 2021. "Financial performance assessment of electricity companies: evidence from Portugal," Operational Research, Springer, vol. 21(4), pages 2809-2857, December.
    10. Balaji S. Chakravarthy, 1986. "Measuring strategic performance," Strategic Management Journal, Wiley Blackwell, vol. 7(5), pages 437-458, September.
    11. Brooks,Chris, 2014. "Introductory Econometrics for Finance," Cambridge Books, Cambridge University Press, number 9781107661455, December.
    12. John Goddard & Manouche Tavakoli & John Wilson, 2005. "Determinants of profitability in European manufacturing and services: evidence from a dynamic panel model," Applied Financial Economics, Taylor & Francis Journals, vol. 15(18), pages 1269-1282.
    13. Noel Capon & John U. Farley & Scott Hoenig, 1990. "Determinants of Financial Performance: A Meta-Analysis," Management Science, INFORMS, vol. 36(10), pages 1143-1159, October.
    14. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    15. Arellano, M, 1987. "Computing Robust Standard Errors for Within-Groups Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(4), pages 431-434, November.
    16. Jaraitė, Jūratė & Kažukauskas, Andrius, 2013. "The profitability of electricity generating firms and policies promoting renewable energy," Energy Economics, Elsevier, vol. 40(C), pages 858-865.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aleksey Oshchepkov & Anna Shirokanova, 2020. "Multilevel Modeling For Economists: Why, When And How," HSE Working papers WP BRP 233/EC/2020, National Research University Higher School of Economics.
    2. William C. Horrace & Kurt E. Schnier, 2010. "Fixed-Effect Estimation of Highly Mobile Production Technologies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(5), pages 1432-1445.
    3. J. Vineesh Prakash & D. K. Nauriyal, 2020. "Automotive Components Industry and Profitability Factors: Evidence from India," Vision, , vol. 25(2), pages 209-223, June.
    4. Nikolaev, V. & van Lent, L.A.G.M., 2005. "The Endogeneity Bias in the Relation Between Cost-of-Debt Capital and Corporate Disclosure Policy," Discussion Paper 2005-67, Tilburg University, Center for Economic Research.
    5. Manuel Arellano & Olympia Bover, 1990. "La econometría de datos de panel," Investigaciones Economicas, Fundación SEPI, vol. 14(1), pages 3-45, January.
    6. Croissant, Yves & Millo, Giovanni, 2008. "Panel Data Econometrics in R: The plm Package," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 27(i02).
    7. John Marangos & Vasiliki Fourmouzi & Minoas Koukouritakis, 2013. "Factors that Determine the Decline in University Student Enrolments in Economics in Australia: An Empirical Investigation," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 255-270, June.
    8. Nikolaev, V. & van Lent, L.A.G.M., 2005. "The Endogeneity Bias in the Relation Between Cost-of-Debt Capital and Corporate Disclosure Policy," Other publications TiSEM 5960a342-0adc-4f85-bf87-2, Tilburg University, School of Economics and Management.
    9. Sanghoon Lee, 2021. "Social Tolerance and Economic Development," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 158(3), pages 1087-1103, December.
    10. Nikolaev, V. & van Lent, L.A.G.M., 2005. "The endogeneity bias in the relation between cost-of-debt capital and corporate disclosure policy," Other publications TiSEM 04869b30-e8a9-4ecf-84ae-6, Tilburg University, School of Economics and Management.
    11. Baltagi, Badi H. & Bresson, Georges & Chaturvedi, Anoop & Lacroix, Guy, 2018. "Robust linear static panel data models using ε-contamination," Journal of Econometrics, Elsevier, vol. 202(1), pages 108-123.
    12. Nigel Rice & Matthew Sutton, 1998. "Drinking patterns within households: the estimation and interpretation of individual and group variables," Health Economics, John Wiley & Sons, Ltd., vol. 7(8), pages 689-699, December.
    13. Guillermina Jasso, 2006. "Factorial Survey Methods for Studying Beliefs and Judgments," Sociological Methods & Research, , vol. 34(3), pages 334-423, February.
    14. Juan Carlos Bou & Albert Satorra, 2014. "Univariate versus multivariate modeling of panel data," Economics Working Papers 1417, Department of Economics and Business, Universitat Pompeu Fabra.
    15. Elif Akben-Selcuk, 2016. "Factors Affecting Firm Competitiveness: Evidence from an Emerging Market," IJFS, MDPI, vol. 4(2), pages 1-10, May.
    16. Morgan, Robert E. & Strong, Carolyn A., 2003. "Business performance and dimensions of strategic orientation," Journal of Business Research, Elsevier, vol. 56(3), pages 163-176, March.
    17. Daron Acemoglu & Philippe Aghion & Claire Lelarge & John Van Reenen & Fabrizio Zilibotti, 2007. "Technology, Information, and the Decentralization of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1759-1799.
    18. Régis BRETON & Sébastien GALANTI & Christophe HURLIN & Anne-Gaël VAUBOURG, 2011. "Does the firm-analyst relationship matter in explaining analysts' earnings forecast errors?," LEO Working Papers / DR LEO 469, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    19. Tesfaye, Wondimagegn & Tirivayi, Nyasha, 2020. "Crop diversity, household welfare and consumption smoothing under risk: Evidence from rural Uganda," World Development, Elsevier, vol. 125(C).
    20. Sheahan, Megan & Black, Roy & Jayne, T.S., 2013. "Are Kenyan farmers under-utilizing fertilizer? Implications for input intensification strategies and research," Food Policy, Elsevier, vol. 41(C), pages 39-52.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:13:y:2021:i:24:p:13544-:d:697039. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.