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Firm and industry effects in accounting versus economic profit data

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  • Matthew Holian
  • Ali Reza

Abstract

This article presents estimates of firm and industry fixed effects on profit rates for large US corporations, using Economic Value Added (EVA), the popular measure of profits produced by Stern Stewart & Co., and simple (unadjusted) accounting measures as the dependent variables. We find that the improvement in explanatory power of the fixed-effect model is substantially greater when using EVA than has been documented with alternative measures.

Suggested Citation

  • Matthew Holian & Ali Reza, 2011. "Firm and industry effects in accounting versus economic profit data," Applied Economics Letters, Taylor & Francis Journals, vol. 18(6), pages 527-529.
  • Handle: RePEc:taf:apeclt:v:18:y:2011:i:6:p:527-529
    DOI: 10.1080/13504851003761756
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    Cited by:

    1. Raza, Syed Ali & Farooq, M. Shoaib & Khan, Nadeem, 2011. "Firm and industry effects on firm profitability: an empirical analysis of KSE," MPRA Paper 36797, University Library of Munich, Germany.
    2. Williams, Michael A. & Baek, Grace & Park, Leslie Y. & Zhao, Wei, 2016. "Global evidence on the distribution of economic profit rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 458(C), pages 356-363.

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