Investigating Profit Persistence Among Hungarian Plastic Manufacturing Companies

Authors

  • Daniel Molnar Institute of Agricultural and Food Economics, Hungarian University of Agriculture and Life Sciences, Kaposvár Campus, 7400 Kaposvár, Guba Sándor u. 40. Hungary. Corresponding author, e-mail: e-mail: victrola2020@gmail.com
  • Tamás Horváth Institute of Agricultural and Food Economics, Hungarian University of Agriculture and Life Sciences, Kaposvár Campus, 7400 Kaposvár, Guba Sándor u. 40. Hungary
  • Tibor Bareith Institute of Economics, Centre for Economic and Regional Studies, 1097 Budapest, Tóth Kálmán u. 4. Hungary

DOI:

https://doi.org/10.33568/rbs.4429

Keywords:

market competition, profitability, dynamic panel, Markov chains

Abstract

This study examines the competitive nature of the Hungarian plastics industry sector based on 2010-2019 data from the Crefoport database.. The aim of the study is to examine that how close the market of plastic industry companies is to perfect competition. Market efficiency was investigated using a Markov chain and profit persistence estimation (Arellano & Bond, 1991). Corporate profitability was measured using the ROA indicator. Variables reflecting industry and market effects are also included in the analysis as controls. Based on the Markov transition probability matrix, market competition is harmed. Based on the panel model estimation, the profit persistence value shows a low value (0.129) compared to the existing literature. The profitability of plastic companies can be statistically proven to be affected by company size (p = -0.046), short (p = 0.016) and long risk (p=-0.093), and the volatility of profitability (p = 0.633). Among the exogenous variables, industry income (p=0.081) and market concentration (p = 0.974) have a significant effect on the profitability of companies. Limited market competition reduces overall social benefit and efficiency in several ways: it reduces price competition, quality orientation, and the pursuit of innovations. Therefore, from the point of view of economic policy , it is definitely justified that the sector receives subsidies in an appropriate amount that improves the efficiency and productivity of small and medium-sized enterprises, as well as encourage technological development and innovation. 

References

Andrady, A. L., & Neal, M. A. (2009). Applications and societal benefits of plastics. Philosophical Transactions of the Royal Society B: Biological Sciences, 364(1526), 1977-1984. https://doi.org/10.1098/rstb.2008.0304

Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. Review of Economic Studies, 58, 277-297. https://doi.org/10.2307/2297968

Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143. https://doi.org/10.1016/s0304-4076(98)00009-8

Borszéki, E. (2008). A jövedelmezőség és a tőkeszerkezet összefüggései a vállalkozásoknál Bulletin of the Szent Istvan University, Special Issue(2). 391-401 http://dx.doi.org/10.22004/ag.econ.43325

Brahney, J., Hallerud, M., Heim, E., Hahnenberger, M., & Sukumaran, S. (2020). Plastic rain in protected areas of the United States. Science, 368(6496), 1257-1260. https://doi.org/10.1126/science.aaz5819

Chen, Y.-M., & Lin, F.-J. (2010). The Persistence of Superior Performance at Industry and Firm Levels: Evidence from the IT Industry in Taiwan. Industry & Innovation, 17(5), 469–486. https://doi.org/10.1080/13662716.2010.510000

Cole, M., Lindeque, P., Halsband, C., & Galloway, T. S. (2011). Microplastics as contaminants in the marine environment: a review. Marine Pollution Bulletin, 62(12), 2588-2597. https://doi.org/10.1016/j.marpolbul.2011.09.025

Goddard, J., Tavakoli, M., & Wilson, J. O. S. (2005). Determinants of profitability in European manufacturing and services: evidence from a dynamic panel model. Applied Financial Economics, 15(18), 1269–1282. https://doi.org/10.1080/09603100500387139

Gschwandtner, A. (2005). Profit persistence in the ‘very’ long run: evidence from survivors and exciters. Applied Economics, 37(7), 793–806. https://doi.org/10.1080/0003684042000337406

Gschwandtner, A. (2012). Evolution of profit persistence in the USA. Evidence from three periods. The Manchester School, 80(2), 172–209. https://doi.org/10.1111/j.1467-9957.2011.02277.x.

Gschwandtner, A., & Hirsch, S. (2017). What Drives Firm Profitability? A Comparison of the US and EU Food Processing Industry. The Manchester School, 86(3), 390–416. https://doi.org/10.1111/manc.12201

Guan, J., Cai, H., & Cao, Y. (2015). Industry versus firm effects on the profit persistence in China. China Economic Review, 34, 83–93. https://doi.org/10.1016/j.chieco.2015.03.005

Hirsch, S. (2017). Successful in the long run: a meta-regression analysis of persistent firm profits. Journal of Economic Surveys, 32(1), 23–49. https://doi.org/10.1111/joes.12188

Hirsch, S., Lanter, D., & Finger, R. (2020). Profitability and profit persistence in EU food retailing: Differences between top competitors and fringe firms. Agribusiness, 37(2), 235–263. https://doi.org/10.1002/agr.21654

Iskenderoglu, O., & Haykir, O. (2018). Profit Persistence in Energy Industry: A Comparison Between Listed and Unlisted Companies. International Journal of Energy Eco-nomics and Policy, 8(4), 288.

Isik, O., & Tasgin, U. F. (2017). Profitability and Its Determinants in Turkish Manufacturing Industry: Evidence from a Dynamic Panel Model. International Journal of Economics and Finance, 9(8), 66. https://doi.org/10.5539/ijef.v9n8p66

Isik, O., Unal, E. A., & Unal, Y. (2017). The Effect of Firm Size on Profitability: Evidence from Turkish Manufacturing Sector. Journal of Business, Economics and Finance, 6(4), 301–308. https://doi.org/10.17261/pressacademia.2017.762

KSH (2021a). Helyzetkép az iparról, 2020. https://www.ksh.hu/docs/hun/xftp/idoszaki/jelipar/2020/index.html

KSH (2021b). 4.2.4. Az ipari termelés értéke alágak szerint. https://www.ksh.hu/docs/hun/xstadat/xstadat_evkozi/e_oia004b.html

KSH (2022). 13.1.1.1. Az ipar összefoglaló adatai. https://www.ksh.hu/stadat_files/ipa/hu/ipa0001.html

Lehoczki, L., (2020). Az európai műanyagipar a számok tükrében. Polimerek Műanyagipari Szaklap. 9(3) 86–89. http://polimerek.hu/2023/03/29/az-europai-muanyagipar-a-szamok-tukreben

MacArthur, E. (2017). Beyond plastic waste. Science, 358(6365), 843-843. https://doi.org/10.1126/science.aao6749

McGahan, A. M., & Porter, M. E. (1999). The Persistence of Shocks to Profitability. Review of Economics and Statistics, 81(1), 143–153. https://doi.org/10.1162/003465399767923890

McGahan, A. M., & Porter, M. E. (2003). The Emergence and Sustainability of Abnormal Profits. Strategic Organization, 1(1), 79–108. https://doi.org/10.1177/1476127003001001219

Mueller, D. C. (1977). The Persistence of Profits above the Norm. Economica, 44(176), 369. https://doi.org/10.2307/2553570

Mueller, D. C. (1986). Profits in the Long Run. https://doi.org/10.1017/cbo9780511664731

Pervan, M., Pervan, I., & Ćurak, M. (2019). Determinants of firm profitability in the Croatian manufacturing industry: evidence from dynamic panel analysis. Economic Research-Ekonomska Istraživanja, 32(1), 968–981. https://doi.org/10.1080/1331677x.2019.1583587

Plastics Europe (2021). Plastics - the Facts 2021. https://plasticseurope.org/wp-content/uploads/2021/12/Plastics-the-Facts-2021-web-final.pdf.

Puziak, M. (2017). The Persistence of Abnormal Returns: Analysis of Polish Manufacturing Industry. Economics & Sociology, 10(1), 48–60. https://doi.org/10.14254/2071-789x.2017/10-1/4

Resende, M. (2006). Profit persistence in Brazil: a panel data study. Estudos Econômicos (São Paulo), 36(1), 115–126. https://doi.org/10.1590/s0101-41612006000100005

Roquebert, J. A., Phillips, R. L., & Westfall, P. A. (1996). Markets vs Management: What ‘drives’ profitability? Strategic Management Journal, 17(8), 653–664.

Sanderson, A., Hlalefang, K., Le Roux, P., & Mutandwa, L. (2018). Review of the Banking Sector Profit Persistence. International Journal of Economics and Financial Issues, 8(1), 54.

Schumacher, S. K., & Boland, M. A. (2005). The Persistence of Profitability among Firms in the Food Economy. American Journal of Agricultural Economics, 87(1), 103–115. https://doi.org/10.1111/j.0002-9092.2005.00705.x

Shepherd, W. G. (1975). The Treatment of Market Power. Columbia University Press. Stephan, A., & Tsapin, A. (2008). Persistence and determinants of firm profit in emerging markets. Applied Economics Quarterly, 54(4), 231-253.

Tsoulfidis, L., Alexiou, C., & Parthenidis, T. (2015). Revisiting profit persistence and the stock market in Japan. Structural Change and Economic Dynamics, 33, 10–24. https://doi.org/10.1016/j.strueco.2015.02.001

Wang, M. H., He, Y., & Sen, B. (2019). Research and management of plastic pollution in coastal environments of China. Environmental pollution, 248, 898-905. https://doi.org/10.1016/j.envpol.2019.02.098

Zeren, F., & Öztürk, E. (2015). Testing for profit persistence of listed manufacturing companies in Istanbul stock exchange. Ekonomika, 61(2), 1–10. https://doi.org/10.5937/ekonomika1502001z

Downloads

Published

2023-07-05

Issue

Vol. 15 No. 1 (2023): Regional and Business Studies

Section

Articles

License

Copyright (c) 2023 Daniel Molnar, Tamás Horváth, Tibor Bareith

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

How to Cite

Investigating Profit Persistence Among Hungarian Plastic Manufacturing Companies. (2023). REGIONAL AND BUSINESS STUDIES, 15(1), 33-45. https://doi.org/10.33568/rbs.4429