Report on statistical analysis of agribusiness profitability - Analysis of AMADEUS data between 2012 and 2017

Paulus Aditjandra*, Gu Pang, Matthew Gorton, Carmen Hubbard

*Corresponding author for this work

Research output: Book/ReportCommissioned report

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Abstract

Food industry profitability and its determinants is an important area for study, with previous research investigating the relative importance of firm and industry level effects. This study employs Hierarchical Linear Modelling (HLM) to understand the determinants of food industry profitability, drawing on firm financial data for the years 2012 to 2017 from the AMADEUS database (n = 8,645 records). Data relate to EU countries. Return on Assets (ROA) is the dependent variable employed with independent variables considered relating to firm (level 1) and industry (level 2) effects. The key findings of the analysis are:

- Market concentration has a positive effect on return on assets;
- Sales growth has a positive effect on return on assets;
- Market share has a positive effect on return on assets;
- Firm age has a negative effect on return on assets;
- Firm size has a positive effect on return on assets;
- Short-term financial risk (debt) has negative effect on return on assets;
- Market concentration positively moderates the relationship between market share and return on assets;
- Industry sales growth market share and return on assets.

For companies seeking to improve their return on assets, the three main strategies suggested from the analysis relate to: relative size and market power (increasing market share and market concentration to achieve greater profitability), reducing short-term debts risks to improve their long-term profitability and focusing on growing market segments.
Original languageEnglish
Number of pages41
DOIs
Publication statusPublished - 28 May 2020

Keywords

  • Agribusiness
  • Profitability
  • Food value chains
  • AMADEUS

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