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Evolution of Profit Persistence in the US: Evidence from four 20-years periods

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Abstract

The present study analyzes and compares profit persistence in four different samples of US companies during the periods 1950-72, 1960-80, 1970-90 and 1980-99. While most of the previous studies perform profit persistence analysis on survivors only, the present setup allows for companies to enter and exit the analyzed sample, thus giving a more comprehensive depiction of the US economy during this half of the century. The results point towards an increase of competition after the opening of the US economy to international competition in the 60-80´s, nevertheless the speed seems to have decreased in the most recent period. Key determinants of profit persistence seem to be firm´s size, industry- and firm growth, and firm growth, and in the most recent period industry concentration, market share, and the company´s merger activity.

Suggested Citation

  • Adelina Gschwandtner, 2004. "Evolution of Profit Persistence in the US: Evidence from four 20-years periods," Vienna Economics Papers 0410, University of Vienna, Department of Economics.
  • Handle: RePEc:vie:viennp:0410
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    1. Gugler, Klaus & Mueller, Dennis C. & Yurtoglu, B. Burcin & Zulehner, Christine, 2003. "The effects of mergers: an international comparison," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 625-653, May.
    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. Jesus Crespo Cuaresma & Adelina Gschwandtner, 2006. "The competitive environment hypothesis revisited: non-linearity, nonstationarity and profit persistence," Applied Economics, Taylor & Francis Journals, vol. 38(4), pages 465-472.
    4. 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.
    5. 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.
    6. Gugler, Klaus & Mueller, Dennis C & Yurtoglu, B Burcin, 2004. "Corporate Governance and the Returns on Investment," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 589-633, October.
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    Citations

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    Cited by:

    1. Jesús Crespo Cuaresma & Adelina Gschwandtner, 2008. "Tracing The Dynamics Of Competition: Evidence From Company Profits," Economic Inquiry, Western Economic Association International, vol. 46(2), pages 208-213, April.
    2. Canarella, Giorgio & Miller, Stephen M. & Nourayi, Mahmoud M., 2013. "Firm profitability: Mean-reverting or random-walk behavior?," Journal of Economics and Business, Elsevier, vol. 66(C), pages 76-97.
    3. Stefan Hirsch & Adelina Gschwandtner, 2013. "Profit persistence in the food industry: evidence from five European countries," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 40(5), pages 741-759, December.
    4. Ajit Singh, 2014. "Competition, Competition Policy, Competitiveness, Globalisation & Development," Working Papers wp460, Centre for Business Research, University of Cambridge.
    5. Ajit Singh, 2016. "Competition, competition policy, competitiveness, globalization and development," Chapters,in: Handbook of Alternative Theories of Economic Development, chapter 35, pages 666-688 Edward Elgar Publishing.
    6. Adelina Gschwandtner & Michael Hauser, 2016. "Profit persistence and stock returns," Applied Economics, Taylor & Francis Journals, vol. 48(37), pages 3538-3549, August.
    7. Adelina Gschwandtner & Stefan Hirsch, 2016. "What drives firm profitability? A comparison of the US and EU food processing industry," Studies in Economics 1612, School of Economics, University of Kent.
    8. M. Capasso & E. Cefis & K. Frenken, 2009. "Do some firms persistently outperform?," Working Papers 09-, Utrecht School of Economics.
    9. Neng Jiang & Paul A. Kattuman, 2010. "Intensity of competition in China: profitability dynamics of Chinese listed companies," Asia Pacific Business Review, Taylor & Francis Journals, vol. 16(3), pages 461-481, July.
    10. Mahmoud M. Nourayi & Julie W. Suh, 2015. "An Empirical Analysis of the Competitiveness in the U.S. Airline Industry," Review of Economics & Finance, Better Advances Press, Canada, vol. 5, pages 83-99, August.
    11. Christa Sys, 2013. "Persistence of profits in the container liner shipping industry," Chapters,in: Smart Transport Networks, chapter 6, pages 99-125 Edward Elgar Publishing.

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    JEL classification:

    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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