The Performance Determinants of Trading Companies: A Stakeholder Perspective
Zdenek Tousek, Jana Hinke, Barbora Malinska, Martin Prokop
Keywords:
financial leverage, profitability, return on assets, return on equity, retail, wholesale
Abstract:
This research aims to propose a model adding to the competitiveness of companies by
identifying factors that determine the profitability of the selected companies (both publicly
traded and unquoted private companies of all sizes). Another aim is to prove a dichotomy
between the motivation of equity holders and senior lenders as far as acceptable financial
leverage is concerned. The paper is innovative based on its combination of several different
factors influencing corporate profitability (i.e. firm-specific effects: current ratio, labor cost
ratio, working capital financing ratio, long-term financing ratio, return on sales, age of the
firm; industry-specific effects and other macroeconomic effects) and by assessing determinants
concerning the interests of shareholders and other stakeholders using a panel regression analysis
with fixed effects. The authors prove that the determinants of the operating performance of
Czech trading companies differ substantially when the performance is measured by ROA or
by ROE. This clearly shows discrepancies between the equity holder interest to maximize their
returns on investment and the other stakeholder interests. Specifically, the authors have found
that the leverage, both in terms of working capital and long-term financing, negatively impacts
returns on assets. On the other hand, it positively impacts returns for equity holders both in the
Wholesale and Retail sub-samples. Interestingly, other determinants of operating performance,
such as capital intensity, labor cost ratio, historical profitability, and macroeconomic variables,
are of comparable significance, impacting both the ROA and ROE analyses.
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 The Performance Determinants of Trading Companies: A Stakeholder Perspective [PDF file] [Filesize: 1.18 MB]
 10.7441/joc.2021.02.09
Tousek, Z., Hinke, J., Malinska, B., & Prokop, M. (2021). The Performance Determinants of Trading
Companies: A Stakeholder Perspective. Journal of Competitiveness, 13(2), 152–170. https://doi.org/10.7441/joc.2021.02.09
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