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Macroeconomic factors or firm-specific factors? An examination of the impact on corporate profitability before, during and after the global financial crisis

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  • Carol Cheong
  • Huy Viet Hoang
  • David McMillan

Abstract

The purpose of this paper is to examine the impact of macroeconomic variables and firm-specific factors on corporate profitability in Singapore and Hong Kong before, during and after the global financial crisis. This paper uses the two-step system Generalized Method of Moments to examine the impact of macroeconomic and firm-specific factors on corporate profitability. The model includes firm-specific factors (firm size, leverage, liquidity, sales growth and previous year’s profitability) and macroeconomic factors (real GDP growth and inflation rate). Corporate profitability is represented by ROA, ROE and Tobin’s Q. Results from the pooled sample showed that past profitability, firm size and leverage have a strong relationship with firm performance. Our pooled sample results also showed that Hong Kong firms are more affected by macroeconomic factors during the global financial crisis than Singapore firms. Our study provides insights into the relationship between firm-specific factors, macroeconomic factors and firm performance under three different economic periods in two developed economies in the Asia-Pacific.

Suggested Citation

  • Carol Cheong & Huy Viet Hoang & David McMillan, 2021. "Macroeconomic factors or firm-specific factors? An examination of the impact on corporate profitability before, during and after the global financial crisis," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1959703-195, January.
    • Handle: RePEc:taf:oaefxx:v:9:y:2021:i:1:p:1959703
    DOI: 10.1080/23322039.2021.1959703
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    Cited by:

    1. Emmanuel Mensah & Joseph Kwadwo Tuffour & Mamdouh Abdulaziz Saleh Al-Faryan, 2023. "Does macroeconomic misery index matter in the micro firm-level earnings Management – performance nexus? Evidence from dynamic Panel threshold regression," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(2), pages 2289321-228, October.
    2. M N, Nikhil & Chakraborty, Suman & B M, Lithin & Lobo, Lumen Shawn, 2023. "Does the adoption of Ind AS affect the performance of firms in India?," MPRA Paper 117247, University Library of Munich, Germany, revised 18 Apr 2023.
    3. Jarosław Nowicki & Piotr Ratajczak & Dawid Szutowski, 2024. "Influence of Macroeconomic Factors on Financial Liquidity of Companies: Evidence from Poland," Risks, MDPI, vol. 12(7), pages 1-22, July.
    4. M N, Nikhil & S Shenoy, Sandeep & Chakraborty, Suman & B M, Lithin, 2023. "Does the Ind AS moderate the relationship between capital structure and firm performance?," MPRA Paper 119541, University Library of Munich, Germany, revised 15 Oct 2023.

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