Drivers of ROE and ROA in the Czech Food Processing Industry in the Context of Market Concentration

Abstract

The paper investigates the effects of sectoral determinants on profitability of the Czech food processing industry over the period of years 2003-2014. Large micro-level sample (N = 10,509) for 12 years and across 9 food subsectors in the Czech Republic was utilized to create a sectoral panel dataset, which was used in the empirical analysis. As for the methods, regression models with fixed effects were employed. Sectoral profitability served as the dependent variable in regressions and it was operationalized by two variables, i.e. ROA and ROE. Both profitability indicators revealed the same influence of investigated determinants. Obtained results reported positive influence of higher market concentration on sectoral profitability, and also the increase of productivity was associated with the increase of ROA and ROE. It was confirmed that high indebtedness affects the profitability negatively. Contrary to the expectations, the effect of the import penetration on the profitability was not proved.

Sectoral and Firm-Level Determinants of Profitability: A Multilevel Approach

“…Hirsch & Schiefer, 2016;Goddard et al, 2009;Claver et al, 2002) showing that the effects of firm-specific factors are more important (they explained around 50% of variability in firm performance) than the effects of sectoral factors (which explained only about 0.3% of variability in firm performance). Although other studies have separately investigated the role of firm-level determinants on firm performance (Blažková & Dvouletý, 2018a) and the role of sectoral variables affecting performance in the whole sector (Blažková & Dvouletý (2017a;2017b), there is no study in the Czech environment that would combine both types of determinants (sectoral and firm) in one complex analysis.…”

“…All variables used in the analysis as determinants of profitability were selected based on the availability of data and based on the previous literature (e.g. Brealey et al, 2017;Hirsch et al, 2014;Blažková & Dvouletý, 2017a, 2017b, 2018a. Since the firm performance is influenced by the competitive environment on the market, market concentration ratio (CR4 j ) was used to reflect the level of imperfect competition on the Czech food market.…”

Is the price-cost margin affected by the market concentration? Evidence from the Czech food and beverages industry

“…While the decrease of the number of firms and growth of market concentration in the whole manufacturing industry of the Czech Republic has been subject to research already (see for example Zemplinerová & Medvedev, 2005;Zemplinerová & Stibal, 1995), the development of the Czech food and beverages industry concentration and its impacts on the food industry performance is obviously less investigated (see e.g. Blažková & Dvouletý, 2017). As mentioned by many authors, e.g.…”

Impact of the market concentration on trading chains' performance in Serbia

“…Looking the character of factor's influence, models reflect negative impact of company size and debt on return on assets as well as positive impact of current liquidity, market share, sales revenue growth, insurance and export on return on assets of medium and large agricultural companies in Vojvodina region in the Republic of Serbia. Blažková and Dvouletý (2017), investigated the sectoral determinants on profitability in the Czech food processing industry in the period 2003-2014. Sectoral profitability, as the dependent variable, was measured by ROA and ROE.…”