Determinants of Profitability: Evidence from US Firms

32 Pages Posted: 19 May 2015 Last revised: 26 Jan 2020

See all articles by Eleftherios Giovanis

Eleftherios Giovanis

Manchester Metropolitan University-Business School, Department of Economics, Policy and International Business; Aydin Adnan Menderes University, Nazilli Faculty of Economics and Administrative Sciences

Oznur Ozdamar

Aydın Adnan Menderes University

Date Written: October 1, 2014

Abstract

This study examines the determinants of profitability using the US Compustat database during the period 1976-2009. The study uses panel data analysis as Generalized Methods of Moments (GMM) dynamic panel models and Quantile regressions. Besides the conventional drivers of profitability a relatedness measure of technology based on patents is explored too, in order to account for information spillovers through the effects of networks and business activities through related or not technologies. The findings suggest that diversification is more likely to be successful within related activities sharing similar business lines and production chains. The drivers of profitability in lags are examined in order to account for their persistence on profitability, as well as their quadratic terms are considered to test for non-monotonic behaviour. In addition, the determinants of profitability are examined during economic recession and nonrecession periods. The overall results indicate that both firm and industry characteristics are important drivers for profitability. Therefore, managers should account for drivers who affect both the individual firm and the sector or industry where the firm is active.

Keywords: Econometrics, Patents, Profitability, Patents, Relatedness Measures, Triadic Families

JEL Classification: C23,D24

Suggested Citation

Giovanis, Eleftherios and Ozdamar, Oznur, Determinants of Profitability: Evidence from US Firms (October 1, 2014). Available at SSRN: https://ssrn.com/abstract=2606691

Eleftherios Giovanis (Contact Author)

Manchester Metropolitan University-Business School, Department of Economics, Policy and International Business ( email )

Business School
All Saints Campus
Manchester, M15 6BH
United Kingdom

Aydin Adnan Menderes University, Nazilli Faculty of Economics and Administrative Sciences ( email )

Nazilli IIBF
Sumer Kampusu
Aydin, Nazilli 09800
Turkey

Oznur Ozdamar

Aydın Adnan Menderes University ( email )

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
20
Abstract Views
136
PlumX Metrics