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The Impact Of Internal Determinants And The Macroeconomic Environment On Firm Profitability

Author

Listed:
  • Ivana Tomas Zikovic

    (University of Rijeka, Faculty of Economics and Business)

  • Andrea Arbula Blecich

    (University of Rijeka, Faculty of Economics and Business)

  • Tanja Vranjes

    (University of Rijeka, Faculty of Economics and Business)

Abstract

The aim of every company is to make a profit. Therefore, the main objective of this study is to determine the impact of internal factors and the GDP per capita index in relation to the EU average as an external factor on the profitability of the company. A regression analysis was performed on a sample of 181 large listed companies in Western Europe from different sectors. Internal determinants include financial indicators, the size and age of the company, while the external factor for assessing the macroeconomic impact on company operations is the volume index of GDP per capita compared to the EU average. The impact of ESG indicator on the company's profitability was also analysed, as it is an internal factor that measures the sustainability of the company's operations and the impact on the environment, social responsibility and management aspects of the company. As expected, the results show that more profitable companies have a higher ESG indicator, lower debt and a higher proportion of long-term assets in total assets. Other observed variables have no significant impact on company profitability. The results have practical implications for companies, investors, regulators and policy makers. The research emphasises the need for the publication of sustainability reports, including the publication of ESG results, which would contribute significantly to improving sustainable business practises.

Suggested Citation

  • Ivana Tomas Zikovic & Andrea Arbula Blecich & Tanja Vranjes, 2024. "The Impact Of Internal Determinants And The Macroeconomic Environment On Firm Profitability," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 33(2), pages 501-519, December.
  • Handle: RePEc:avo:emipdu:v:33:y:2024:i:2:p:501-519
    DOI: 10.17818/EMIP/2024/2.8
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    More about this item

    Keywords

    business; consumer behaviour; generation; marketing; motivation; sharing economy;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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