Economics & Sociology

ISSN: 2071-789X eISSN: 2306-3459 DOI: 10.14254/2071-789X
Index PUBMS: f5512f57-a601-11e7-8f0e-080027f4daa0
Article information
Title: The Persistence of Abnormal Returns: Analysis of Polish Manufacturing Industry
Issue: Vol. 10, No 1, 2017
Published date: 03-2017 (print) / 03-2017 (online)
Journal: Economics & Sociology
ISSN: 2071-789X, eISSN: 2306-3459
Authors: Marcin Puziak
Poznan University of Economics
Keywords: panel data, firm profitability, abnormal returns, persistence of profits
DOI: 10.14254/2071-789X.2017/10-1/4
Index PUBMS: 37b0f6f3-003e-11e8-94c4-fa163e5d4f72
Language: English
Pages: 48-60 (13)
JEL classification: C23, D22, L13, L60

The ultimate goal of a company is to build the enterprise value, which is achievable thanks to abnormal profits generated in particular period. Moreover, firms are expected to take measures to maintain abnormal profit in the future. On the other hand, abnormal profits attract competitors, who increase competition and as a result abnormal profits disappear. The persistence of profit is a term that describes a situation, when the company is successful in maintaining the abnormal profit over time. The main aim of this paper is to investigate the persistence of abnormal profit in Polish manufacturing sector. In other words, the question is whether Polish manufacturing companies are able to maintain their abnormal profits over time. The persistence of abnormal profits is investigated using dynamic panel model with generalized method-of-moments estimators. The method is applied to a panel of 5303 Polish companies from manufacturing sector observed over the period 2006-2014. This paper contributes to the existing literature in two ways. First, analysis is performed for developing country. Second, analysis is performed both at the level of entire sector and at division level. Three main conclusions can be drawn from the conducted research: there are significant differences between profit rates within the same industry at division level; estimated persistence of abnormal profit coefficients are at moderate level; there are substantial differences between estimated persistence of profit coefficients for divisions in the same industry.


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