engleski

Determinants of Firm Profitability in Eastern Croatia

The aim of this paper is to analyze the determinants of firm profitability in Eastern Croatia (namely County of Virovitica- Podravina, County of Požega-Slavonia, County of BrodPosavina, County of Osijek-Baranja, and County of Vukovar-Srijem) and to determine if they differ significantly from firm profitability determinants in the rest of Croatia. In the analysis data from the Amadeus database on medium, large, and very large active companies is used, in the biggest four sectors of activity in Eastern Croatia: agriculture (A), manufacturing(C), construction (F), and trade (G). After statistical rejection of lagged profits as determinants of current profits, a fixed effects model using Driscoll- Kraay standard errors is applied, and positive effects of market share (in sectors C and G), labor productivity (C and G), capital productivity (C and G), liquidity (C and G), export intensity (C) and negative effects of insolvency (C and G), indebtedness (G), export intensity (G), capital intensity (C and G), taxes (A and G) and labor costs (C and G) are found. The analysis also shows that when comparing Eastern Croatia to the rest of the country, there is significantly greater positive impact of export intensity (in sectors A and C) and labor productivity (G) in Eastern Croatia. On the other hand, there is significantly greater negative impact of taxes (A and G) and export intensity (G), but also a less negative impact of labor costs (C and G) and insolvency (G) in Eastern Croatia compared to the rest of the country. The analysis revealed no robust statistically significant profitability determinants for the construction sector and also no robust differences in profitability determinants of this sector. These results offer clear directions for assisting development of Eastern Croatian entrepreneurship, both in general and sector- specific.

firm profitability, eastern Croatia, fixed effects

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