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What Determines Corporate Financial Performance?

In: Toward an Integrative Explanation of Corporate Financial Performance

Author

Listed:
  • Noel Capon

    (Columbia University)

  • John U. Farley

    (Dartmouth College)

  • Scott Hoenig

    (Fordham University)

Abstract

Major U.S. manufacturing firms earn vastly different levels of profitability. A broad range of profit performance occurs annually and average profits change over time. For example, in 1980 75 Fortune 500 firms earned more than 20 percent return-on-equity (ROE), but 29 firms earned less than 5 percent, and 31 made losses.1 The other firms earned intermediate levels of profitability (see Table 1.1). More than a decade later in 1991, the profit distribution was skewed toward overall lower profitability. Sixty-two firms earned an ROE greater than 20 percent, but 59 firms earned less than 5 percent, and a whopping 153 made losses. (Just two years later, the distribution was similar at higher ROE levels, but fewer firms made losses.) Furthermore, the cast of firms changed considerably; only 271 of the Fortune 500 of 1981 were members of the Fortune 500 in 1992,266 in 1994.2

Suggested Citation

  • Noel Capon & John U. Farley & Scott Hoenig, 1996. "What Determines Corporate Financial Performance?," Springer Books, in: Toward an Integrative Explanation of Corporate Financial Performance, chapter 0, pages 1-25, Springer.
    • Handle: RePEc:spr:sprchp:978-94-011-5380-5_1
    DOI: 10.1007/978-94-011-5380-5_1
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