Hirsch, Stefan: Abnormal profits and profit persistence: evidence from the European food industry. - Bonn, 2014. - Dissertation, Rheinische Friedrich-Wilhelms-Universität Bonn.
Online-Ausgabe in bonndoc: https://nbn-resolving.org/urn:nbn:de:hbz:5n-35678
urn: https://nbn-resolving.org/urn:nbn:de:hbz:5n-35678,
author = {{Stefan Hirsch}},
title = {Abnormal profits and profit persistence: evidence from the European food industry},
school = {Rheinische Friedrich-Wilhelms-Universität Bonn},
year = 2014,
month = apr,

note = {This thesis comprises three papers that aim to analyze the phenomenon of firm profits in the European food industry that differ from the competitive norm either at a specific point in time or over longer time periods. The thesis adds to existing literature as it is one of the first studies of this type that directly focuses on the European food industry. Following an extended introduction, the first paper estimates the relative importance of firm, industry, country and year effects as drivers for profit deviations from the competitive norm at a specific point in time which are also commonly named ‘abnormal profits’. Besides conventional approaches such as ANOVA or components of variance, a hierarchical linear model (HLM) is implemented. The HLM approach additionally provides the possibility to estimate the impact of structural firm and industry variables on the degree of abnormal profits. All three approaches lead to the result that firm effects are the most important driver for abnormal profits while industry effects only play a minor role. Among the structural firm and industry variables it is in particular the size of firms’ that positively influences the degree of abnormal profits. On the other hand, firm risk and age as well as the growth rate of the industry in which firms operate have a negative impact.
While the first paper focuses on abnormal profits at a specific point in time, the second paper analyzes the persistence of abnormal firm profits over longer time periods. This analysis is based on autoregressive models (AR) as well as Arellano-Bond dynamic panel estimation. Both approaches additionally allow for the identification of the firm and industry characteristics that determine the degree of profit persistence. The estimation reveals that a significant number of firms generate abnormal profits that persist in the long run. However, as competition among food industry firms is strong and concentration in the downstream market is high, persistence in abnormal profits in the food industry tends to be lower in comparison to other manufacturing sectors. Further characteristics that have a negative influence on the degree of persistence are firm age and risk as well as the industries R&D intensity. Similar to the occurrence of abnormal profits at a specific point in time, firm size is estimated to have a positive impact on the persistence of such profits.
The first two papers of the thesis are based on a sample of 5,494 food processors from the five countries: Belgium, France, Italy, Spain and the United Kingdom. The third paper also uses AR models and dynamic panel estimation to analyze a sample of 590 dairy processors from the same five countries. Here the dairy industry was chosen not only because of its economic importance within the food industry but also due to its special structural features such as a high number of cooperatives and a strong regulation of economic activity by the Common Agricultural Policy (CAP). The AR models reveal that cooperatives, which account for approximately 20 % of all firms in the sector, are not predominantly profit oriented. Similar to the entire food industry the results indicate strong competition as the degree of persistence remains low even when cooperatives are removed from the sample. Again firm size turns out to be an important driver for persistence. Firm age and risk as well as growth and R&D investment of the sector have a negative impact. The same holds for the level of concentration in the retail sector which is an indicator of the retailers’ bargaining power.},

url = {http://hdl.handle.net/20.500.11811/5838}

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