Financial Factors Explaining Value Migration: Evidence from Central Europe

The objective of this article is to identify the relationship between financial factors and value migration on a yearly basis. The data cover nonfinancial firms listed on exchanges in Central European (CE) countries from 2016 to 2020. To evaluate the migration of value between industries, the share in the industry migration balance was estimated. Next, averages in three industry terciles, set on the basis of the change in market value added, were calculated and compared using both parametric and nonparametric tests. It allowed us to analyse the economic and statistical significance of the value drivers in the value migration process. The value migration in the largest Central European industries intensified during the COVID-19 crisis. The largest sectors were not negatively affected by the pandemic. It seems that, at least for some industries, there was a positive relationship between the growth of market value and sales profitability, sales growth, and cash levels. The market value drivers did not significantly change in the first year of the pandemic. This study contributes to the recent empirical literature on value changes and fills the gaps in the current research for the Central European region, during the time of the macroeconomic crisis induced by the COVID-19 pandemic. The conclusions on the value migration factors may be useful for investors in their decision-making process. Our results can also serve as a valuable reference for managers in the process of defining business strategies, especially during turbulent periods.