Abstract
Research background: Profitability and the factors that determine it have always intrigued the scholars. Despite the large number of studies dealing with this topic at the international level, this paper sheds a new light on the issue since it deals with the listed companies in an emerging economy confronting two performance measures. Purpose of the article: The aim of this paper is to provide evidence on the performance of Croatian non-financial firms listed on the Zagreb Stock Exchange (ZSE). Methods: The analysis encompassed firms that operated in the 2015 – 2019 period. For this purpose, the authors confronted two performance measures, i.e. accounting-based performance measure represented with return on assets (ROA) whereas Tobin’s Q stands for the market-based measure of performance or firm value. Independent variables that served as potential determinants of listed companies’ performance include inventories management, productivity, liquidity measured with both current and quick ratio, and size calculated on the basis of total assets, and sales. Findings & Value added: After employing static panel analysis, the results reveal statistically significant influence of size variable based on assets in both models though it takes negative sign in the model where performance is measured with Tobin’s Q, whereas its positive impact on performance is recorded in ROA model. Furthermore, size based on total sales also positively affects performance when measured with ROA.
Highlights
IntroductionThere are several theories on the determinants of companies’ profitability as well as numerous studies that are mostly based on structure-conduct-performance (SCP) paradigm stemming from industrial organization economics as suggested by [1]
In the year 2019 shares of publicly traded companies on Zagreb Stock Exchange (ZSE) in Croatia had market capitalization of 19.492 million of euros which is an increase of 11% compared to the previous year suggesting the importance of corporate sector performance the importance of analysing the determinants of performance of such companies.There are several theories on the determinants of companies’ profitability as well as numerous studies that are mostly based on structure-conduct-performance (SCP) paradigm stemming from industrial organization economics as suggested by [1]
Findings & Value added: After employing static panel analysis, the results reveal statistically significant influence of size variable based on assets in both models though it takes negative sign in the model where performance is measured with Tobin’s Q, whereas its positive impact on performance is recorded in return on assets (ROA) model
Summary
There are several theories on the determinants of companies’ profitability as well as numerous studies that are mostly based on structure-conduct-performance (SCP) paradigm stemming from industrial organization economics as suggested by [1]. SCP paradigm presupposes causal relationships between market structure, the conduct or behaviour of firms operating in the market and their economic performance. We base our analysis on the firm level encompassing non-financial firms listed on ZSE in the period 2015-2019. The sample deals with Croatian non-financial listed firms only. Several non-extensively used firm-specific variables, at least in the context of empirical research dealing with Croatian companies’ performance, have been employed in the analysis in order to find out their potential influence on performance
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