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The Causes of Profit Heterogeneity in Large Australian Firms

Author

Listed:
  • Andreas Stierwald

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

The objective of this paper is to investigate the causes of heterogeneity in firm performance. In particular, the study decomposes unobserved heterogeneity in profitability into firm and industry effects and quantifies the relative importance of both these effects. For a sample of large Australian firms for the period 1995-2005, the estimation results indicate that almost two thirds of the heterogeneity can be explained by differences across firms, and that industry effects are of much less importance. Another result is that the level of total factor productivity, as a component of firm effects, significantly enhances profitability, but also that this relationship is not identical among firms.

Suggested Citation

  • Andreas Stierwald, 2010. "The Causes of Profit Heterogeneity in Large Australian Firms," Melbourne Institute Working Paper Series wp2010n07, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2010n07
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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2010n07.pdf
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    Cited by:

    1. Felix Akinlade Babatola & Oluwatoyin Odunayo Fabiyi & Ayodeji Sikiru Animasaun, 2023. "Marketing Strategies and Sales Performance of Non-Durable Product During and After Covid 19 Pandemic in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(11), pages 1968-1979, November.
    2. Muhammad Zeeshan Younas, 2022. "A Spatial Agglomeration Analysis of Firm Productivity: A Case of the Textile Sector of Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 27(1), pages 20-67, Jan-June.
    3. Roopali Batra & Ashima Kalia, 2016. "Rethinking and Redefining the Determinants of Corporate Profitability," Global Business Review, International Management Institute, vol. 17(4), pages 921-933, August.

    More about this item

    Keywords

    firm performance; determinants of profit; multi-level analysis; firm effects;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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