Mid-Sized Italian Manufacturing Firms: A Panel Data Analysis on Profitability
Abstract
This paper aims to provide an empirical analysis concerning the different aspects of profitability of the Italian manufacturing firms of intermediate size, namely medium and medium-large size companies, for the period 2004-2010. It analyzes various aspects of firm profitability relating corporate structures, that is, capital structure, risk component, asset composition, and growth opportunities. The study investigates firm profitability by using econometric panel-data techniques, such as the system dynamic GMM estimator that assures the robustness of our empirical analysis. One of the main results of our investigation is that we find asignificant and negative impact ofcapital structure (i.e. leverage and tangibility) and risk component on firm profitability.References
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[8] Bond, S. (2002). Dynamic panel data models: a guide to micro data methods and practice, Working Paper 09/02. Institute for Fiscal Studies, London.
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[10] Cameron, C., Trivedi, P.K. (2011). Microeconometric, Methods and Application. Cambridge, Cambridge University Press (Virtual Publishing).
[11] Claver, E., Molina, J., Tarí, J. (2002). Firm and industry effects on firm profitability: a Spanish empirical analysis. European Management Journal, 20(3): 321-328.
[12] Coad, A. (2007). Testing the principle of growth of the fitter: the relationship between profits and firms growth. Structural Change and Economic Dynamics, 18: 370-386. Available at: http://dx.doi.org/10.1016/j.strueco.2007.05.001
[13] Colli, A. (2005). Il quarto capitalismo. L’Industria, 2: 219-236.
[14] Coltorti, F. (2006). Il capitalismo di mezzo negli anni della crescita zero. Economia Italiana, 3: 665-687.
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[18] Coltorti, F., Resciniti, R., Tunisini, A., Varaldo, R. (eds.) (2013). Mid-Sized Manufacturing Companies: The New Driver of Italian Competitiveness, Berlin, Springer Verlag.
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[20] Davidsson, P. Steffens, P., Fitzsimmons, J. (2009). Growing profitable or growing from profits: putting the horse in front of the cart? Journal of Business Venturing, 24: 388-406.
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[22] Fama, E., Miller, M. (1972).The Theory of finance.New York, Holt, Rinehart and Winston.
[23] Feenstra, R. C. (1998). Integration of trade and disintegration of production in the global economy. Journal of Economic Perspectives, 12 (4): 31-50.
[24] Gleason, K. C., Mathur, L.K. and I. Mathur (2000). The Interrelationship between Culture, Capital Structure and Performance: Evidence from European Retailers. Journal of Business Research, 50: 185-191.
[25] Goddard, J., Tavakoli, M., Wilson, J. (2005). Determinants of profitability in European manufacturing and services: evidence from a dynamic panel model. Applied Financial Economics, 15(18): 1269-1282.
[26] Goddard, J., Tavakoli, M., Wilson, J., (2009). Sources of variation in firm profitability and growth, Journal of Business Research, 62(4): 495-508.
[27] Gujarati, D., Porter, D.C. (2009). Basic Econometrics. 5th Edition. New York, McGraw-Hill.
[28] Hall, M., Weiss, L. (1967). Firm Size and Profitability. The Review of Economics and Statistics, 49(3): 319-331.
[29] Harris, M., Raviv, A. (1990). Capital structure and the informational role of debt. Journal of Finance, 45: 321-349.
[30] Hawawini, G., Subramanian, V., Verdin, P. (2003). Is performance driven by industry or firm-specific factors? A new look at the evidence. Strategic Management Journal, 24:1-16.
[31] Jang, S. S., Park, K. (2011). Inter-relationship between firm growth and profitability. International Journal of Hospitality Management, 30(4):1027-1035.
[32] Jensen, M., Meckling, W.H. (1976).Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4): 305-360.
[33] Lee, B. S., Li, M.-Y. L. (2012). Diversification and risk-adjusted performance: a quantile regression approach. Journal of Banking and Finance, 36: 2157-2173.
[34] Levinthal, D. (1995). Strategic management and the exploration of diversity, in C.A. Montgomery (Ed.), Resource-Based and Evolutionary Theories of the Firm, Norwell (MA), Kluwer.
[35] Kachlami, H. Yazdanfar, D. (2016). Determinants of SME growth: The influence of financing pattern. An empirical study based on Swedish data. Management Research Review, 39(9): 966 – 986. Available: http://dx.doi.org/10.1108/MRR-04-2015-0093
[36] Marini, D. (ed.) (2008). Fuori dalla Media: Percorsi di Sviluppo delle Imprese di Successo. Venezia, Marsilio.
[37] McGahan, A. Porter, M. (1997). How much does industry matter really? Strategic Management Journal, 18: 15-30.
[38] McGahan, A. Porter, M. (1999). The persistence of shocks to profitability, Review of Economics and Statistics, 81: 143-153. doi:10.1162/003465399767923890
[39] Migliardo, C. (2012). Heterogeneity in price setting behavior, spatial disparities and sectoral diversity: Evidence from a panel of Italian firms. Economic Modelling, 29 (4): 1106-1118.
[40] Modigliani, F., Miller, M. (1958).The Cost of Capital, Corporate Finance and Theory of Investment. American Economic Review, 48 (3): 261-297.
[41] Modigliani, F., Miller, M. (1963).Corporate income taxes and the cost of capital: a correction. American Economic Review, 53 (3): 433–443.
[42] Myers, S. C. (2001). Capital structure. Journal of Economic Perspectives, 15(2): 81-102.
[43] Myers, S. C., Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics,13 (2): 187–221.
[44] Nucci, F., Pozzolo, A., Schivardi, F. (2005). Is firm’s productivity related to its financial structure? Evidence from microeconomic data. Working Paper, Research Department,Roma, Bancad’Italia.
[45] Nunes, P. J. M., Serrasqueiro, Z.M., Sequiera, T. N. (2009). Profitability in Portuguese service industries: a panel data approach.The Service Industries Journal 29: 693:707.
[46] Peteraf, M. (1993). The cornerstones of competitive advantage: a resource based view, Strategic Management Journal, 14: 179-191.
[47] Roodman, D. (2009). A note on the theme of too many instruments. Oxford Bulletin of Economics and Statistics, 71(1): 135-158.
[48] Rumelt, R. (1991). How much does industry matter? Strategic Management Journal, 12(3): 167-185. DOI: 10.1002/smj.4250120302
[49] Schilirò, D. (2010). Distretti e quarto capitalismo. Milano, Franco Angeli.
[50] Schilirò, D. (2011). Innovation and performance of Italian multinational enterprises of the “fourth capitalism”. Journal of Advances Research in Management, Volume II, 2: 89-103.
[51] Schilirò, D. (2012). Italian medium-sized enterprises and the fourth capitalism. Journal of Applied Economic Sciences, Volume VII, 4: 436-446.
[52] Teece, D. (1981). Internal organization and economic performance: an empirical analysis of the profitability of principal firms. Journal of Industrial Economics, 30:173-199.
[53] Windmeijer, F. (2005).A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics, 126: 25-51. Available at: http://dx.doi.org/10.1016/j.jeconom.2004.02.005
[54] Zeitun, R., Tian, G.G. (2007). Capital structure and corporate performance: evidence from Jordan. Australasian Accounting Business and Financial Journal, 1(4): 40-61.
*** Cerved, (2014). 2014 Cerved SMEs Report, Milano, Cerved, New Copy Service, October.
*** Mediobanca, (2005-2011). Le Principiali Società Italiane (various years), Milano.
[2] Arellano, M., Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68: 29-52. Available at: http://dx.doi.org/10.1016/0304-4076(94)01642-D
[3] Artiach, T., Lee, D., Nelson, D., Walker, J. (2010).The determinants of corporate sustainability performance. Accounting and Finance, 50: 31-51. DOI: 10.1111/j.1467-629X.2009.00315.x
[4] Baltagi, B. (2008). Econometric Analysis of Panel Data. 4th Edition. New York, John Wiley & Sons.
[5] Barney, J. (1991). Firm resources and sustained competitive advantages. Journal of Management, 17(1): 99-120. doi: 10.1177/014920639101700108
[6] Berger, A.N., Bonaccorsi di Patti, E. (2006). Capital structure and firm performance: a new approach to testing agency theory and an application to the banking industry. Journal of Banking & Finance, 30: 1065-1102.
[7] Blundell, R., Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87: 115-143. Available at: http://dx.doi.org/10.1016/S0304-4076(98)00009-8
[8] Bond, S. (2002). Dynamic panel data models: a guide to micro data methods and practice, Working Paper 09/02. Institute for Fiscal Studies, London.
[9] Brito, L. and Vasconcelos, F. 2006. How Much Does Country Matter? In A. Cooper, S. Alvarez, A. Carrera, L. Mesquita, and R. Vassolo (eds.), Entrepreneurial Strategies. Oxford, UK: Blackwell, pp. 95-113.
[10] Cameron, C., Trivedi, P.K. (2011). Microeconometric, Methods and Application. Cambridge, Cambridge University Press (Virtual Publishing).
[11] Claver, E., Molina, J., Tarí, J. (2002). Firm and industry effects on firm profitability: a Spanish empirical analysis. European Management Journal, 20(3): 321-328.
[12] Coad, A. (2007). Testing the principle of growth of the fitter: the relationship between profits and firms growth. Structural Change and Economic Dynamics, 18: 370-386. Available at: http://dx.doi.org/10.1016/j.strueco.2007.05.001
[13] Colli, A. (2005). Il quarto capitalismo. L’Industria, 2: 219-236.
[14] Coltorti, F. (2006). Il capitalismo di mezzo negli anni della crescita zero. Economia Italiana, 3: 665-687.
[15] Coltorti, F. (2012). Italian industry, decline or transformation?A framework. European Planning Studies, 1-41. doi: 10.1080/09654313.2012.722972
[16] Coltorti, F. (2014). Il Quarto capitalismo: vero motore dello sviluppo italiano, MBRES, Milano Mediobanca. https://www.mbres.it
[17] Coltorti, F., Garofoli, G. (2011). Le medie imprese in Europa. Economia Italiana, 1:187-223.
[18] Coltorti, F., Resciniti, R., Tunisini, A., Varaldo, R. (eds.) (2013). Mid-Sized Manufacturing Companies: The New Driver of Italian Competitiveness, Berlin, Springer Verlag.
[19] Cowling, M. (2004).The growth-profit nexus. Small Business Economics, 22: 1-9.
[20] Davidsson, P. Steffens, P., Fitzsimmons, J. (2009). Growing profitable or growing from profits: putting the horse in front of the cart? Journal of Business Venturing, 24: 388-406.
[21] Deloof, M. (2003). Does Working Capital Management Affect Profitability of Belgian Firms. Journal of Business Finance and Accounting, 30: 573-588.
[22] Fama, E., Miller, M. (1972).The Theory of finance.New York, Holt, Rinehart and Winston.
[23] Feenstra, R. C. (1998). Integration of trade and disintegration of production in the global economy. Journal of Economic Perspectives, 12 (4): 31-50.
[24] Gleason, K. C., Mathur, L.K. and I. Mathur (2000). The Interrelationship between Culture, Capital Structure and Performance: Evidence from European Retailers. Journal of Business Research, 50: 185-191.
[25] Goddard, J., Tavakoli, M., Wilson, J. (2005). Determinants of profitability in European manufacturing and services: evidence from a dynamic panel model. Applied Financial Economics, 15(18): 1269-1282.
[26] Goddard, J., Tavakoli, M., Wilson, J., (2009). Sources of variation in firm profitability and growth, Journal of Business Research, 62(4): 495-508.
[27] Gujarati, D., Porter, D.C. (2009). Basic Econometrics. 5th Edition. New York, McGraw-Hill.
[28] Hall, M., Weiss, L. (1967). Firm Size and Profitability. The Review of Economics and Statistics, 49(3): 319-331.
[29] Harris, M., Raviv, A. (1990). Capital structure and the informational role of debt. Journal of Finance, 45: 321-349.
[30] Hawawini, G., Subramanian, V., Verdin, P. (2003). Is performance driven by industry or firm-specific factors? A new look at the evidence. Strategic Management Journal, 24:1-16.
[31] Jang, S. S., Park, K. (2011). Inter-relationship between firm growth and profitability. International Journal of Hospitality Management, 30(4):1027-1035.
[32] Jensen, M., Meckling, W.H. (1976).Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4): 305-360.
[33] Lee, B. S., Li, M.-Y. L. (2012). Diversification and risk-adjusted performance: a quantile regression approach. Journal of Banking and Finance, 36: 2157-2173.
[34] Levinthal, D. (1995). Strategic management and the exploration of diversity, in C.A. Montgomery (Ed.), Resource-Based and Evolutionary Theories of the Firm, Norwell (MA), Kluwer.
[35] Kachlami, H. Yazdanfar, D. (2016). Determinants of SME growth: The influence of financing pattern. An empirical study based on Swedish data. Management Research Review, 39(9): 966 – 986. Available: http://dx.doi.org/10.1108/MRR-04-2015-0093
[36] Marini, D. (ed.) (2008). Fuori dalla Media: Percorsi di Sviluppo delle Imprese di Successo. Venezia, Marsilio.
[37] McGahan, A. Porter, M. (1997). How much does industry matter really? Strategic Management Journal, 18: 15-30.
[38] McGahan, A. Porter, M. (1999). The persistence of shocks to profitability, Review of Economics and Statistics, 81: 143-153. doi:10.1162/003465399767923890
[39] Migliardo, C. (2012). Heterogeneity in price setting behavior, spatial disparities and sectoral diversity: Evidence from a panel of Italian firms. Economic Modelling, 29 (4): 1106-1118.
[40] Modigliani, F., Miller, M. (1958).The Cost of Capital, Corporate Finance and Theory of Investment. American Economic Review, 48 (3): 261-297.
[41] Modigliani, F., Miller, M. (1963).Corporate income taxes and the cost of capital: a correction. American Economic Review, 53 (3): 433–443.
[42] Myers, S. C. (2001). Capital structure. Journal of Economic Perspectives, 15(2): 81-102.
[43] Myers, S. C., Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics,13 (2): 187–221.
[44] Nucci, F., Pozzolo, A., Schivardi, F. (2005). Is firm’s productivity related to its financial structure? Evidence from microeconomic data. Working Paper, Research Department,Roma, Bancad’Italia.
[45] Nunes, P. J. M., Serrasqueiro, Z.M., Sequiera, T. N. (2009). Profitability in Portuguese service industries: a panel data approach.The Service Industries Journal 29: 693:707.
[46] Peteraf, M. (1993). The cornerstones of competitive advantage: a resource based view, Strategic Management Journal, 14: 179-191.
[47] Roodman, D. (2009). A note on the theme of too many instruments. Oxford Bulletin of Economics and Statistics, 71(1): 135-158.
[48] Rumelt, R. (1991). How much does industry matter? Strategic Management Journal, 12(3): 167-185. DOI: 10.1002/smj.4250120302
[49] Schilirò, D. (2010). Distretti e quarto capitalismo. Milano, Franco Angeli.
[50] Schilirò, D. (2011). Innovation and performance of Italian multinational enterprises of the “fourth capitalism”. Journal of Advances Research in Management, Volume II, 2: 89-103.
[51] Schilirò, D. (2012). Italian medium-sized enterprises and the fourth capitalism. Journal of Applied Economic Sciences, Volume VII, 4: 436-446.
[52] Teece, D. (1981). Internal organization and economic performance: an empirical analysis of the profitability of principal firms. Journal of Industrial Economics, 30:173-199.
[53] Windmeijer, F. (2005).A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics, 126: 25-51. Available at: http://dx.doi.org/10.1016/j.jeconom.2004.02.005
[54] Zeitun, R., Tian, G.G. (2007). Capital structure and corporate performance: evidence from Jordan. Australasian Accounting Business and Financial Journal, 1(4): 40-61.
*** Cerved, (2014). 2014 Cerved SMEs Report, Milano, Cerved, New Copy Service, October.
*** Mediobanca, (2005-2011). Le Principiali Società Italiane (various years), Milano.
Published
2017-01-30
How to Cite
MIGLIARDO, Carlo; SCHILIRÒ, Daniele.
Mid-Sized Italian Manufacturing Firms: A Panel Data Analysis on Profitability.
Journal of Advanced Studies in Finance, [S.l.], v. 7, n. 2, p. 129-145, jan. 2017.
ISSN 2068-8393.
Available at: <https://journals.aserspublishing.eu/jasf/article/view/552>. Date accessed: 25 apr. 2024.
Section
Journal of Advanced Studies in Finance
Keywords
Mid-sized Italian firms; profitability; panel data; (GMM) generalised methods of moments
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