Profit Persistence in the "Very" Long Run: Evidence from Survivors and Exiters

One of the main shortcomings of the profit persistence literature is the fact that it looks only at surviving companies. This paper uses a unique dataset to analyze profit persitstence in two different stationary series: 85 surviving US companies from 1950-1999 and 72 exiters. While the exiters perform more competitive than the survivors there is still significant evidence for persitstence in both samples. Concentration and growth of the industry as well as size and volatility of profits seem to play an important role in explaining persistence.

Evolution of Profit Persistence in the US: Evidence from four 20-years periods

The present study analyzes and compares profit persistence in four different samples of US companies during the periods 1950-72, 1960-80, 1970-90 and 1980-99. While most of the previous studies perform profit persistence analysis on survivors only, the present setup allows for companies to enter and exit the analyzed sample, thus giving a more comprehensive depiction of the US economy during this half of the century. The results point towards an increase of competition after the opening of the US economy to international competition in the 60-80´s, nevertheless the speed seems to have decreased in the most recent period. Key determinants of profit persistence seem to be firm´s size, industry- and firm growth, and firm growth, and in the most recent period industry concentration, market share, and the company´s merger activity.

A Welfare Comparison Between Export Subsidies and Exchange Rate Depreciation

This paper develops a Bertrand Price Competition model with differentiated goods in which export subsidies are compared to exchange rate depreciation as different government policies for promoting exports. National governments may wish to help domestic firms to expand market shares in profitable areas and might do this through either one of these two tools. Their effects on equilibrium values are analyzed and compared. It is shown that while the two examined trade policies give rise to the same highest welfare, they could produce some significant differences according to circumstances. If the exchange rate is sufficiently high and the level of the nominal wage sufficiently low, the marginal effect of the subsidy will be higher. But if unions are strong (and demand a high nominal wage) and the exchange rate is sufficiently low, the governments could also consider a depreciation as an alternative policy to export subsidies.Export susidies, Exchange rate depreciation, International trade, Bertrand competition

Profit Persistence in the Food Industry: Evidence from five European Countries

Agribusiness,

Explaining the persistence of profits: A time-varying approach

The present paper analyzes the determinants of profit persistence using a newly developed methodology that allows for the persistence parameter to vary with time. It therefore addresses a significant limitation of previous persistence models, which have assumed unrealistically that persistence is fixed over relatively long period of 20 years upwards. The concentration and the size of the industry are found to have a significant positive impact on profit persistence. However, at firm level, market share and risk have surprisingly a negative impact on profit persistence.

On Modelling the Persistence of Profits in the Long Run: An Analysis of 156 US Companies, 1950-1999

Long run persistence in company profits is analyzed for 156 US companies over a fifty-year period using AR1 and structural time series tests. A statistically significant degree of consitstency is found between them in identifying firms persistently above or below the competitive norm. However, the structural time series method detects a higher overall incidence of persistence, with nearly 70% of firms classed as not having converged on Zero, compared with 46% under AR1 estimation. The recently proposed structural approach is seen as a useful additional tool in analysing earnings dynamics, in particular where are complex trends and other dynamic complexities.

Tracing the dynamics of competition: Evidence from company profits

This paper proposes a simple approach to analyzing pro¯t dynam- ics which allows for time-varying persistence of pro¯ts. The time se- ries model is a simple autoregressive process where the dynamics of the persistence parameter follow an autoregressive or random walk pro- cess. Using the longest time series available on pro¯ts for six US ¯rms (Archer-Daniels-Midland , Avon, Coca Cola, Johnson & Johnson, WHX Corporation andWrigley), we analyze the dynamics of pro¯t persistence for the second half of the twentieth century.

Social Capital, Creative Destruction and Economic Growth

The dynamic structure of profit rates for 156 US manufacturing companies is analyzed by means of fractional integration techniques as an alternative to the commolny used ARMIA models with respect to the "persistence of profits". The results show - despite the short lengths of the series - that 35,5% of the series have long range dependence and 54% are nonstationary. This is a confirmation of the strong challenge to the competitive environment hypothesis obtained by previous studies.

Sunk costs, Profit Volatility, and Turnover

Dynamic competitive models of industry evolution suggest that firm profit will be more volatile and turnover will be lower in industries with higher sunk costs. These implications are consistent with empirical observation.

The competitive environment hypothesis revisited: Nonlinearity, nonstationrity and profit persistence

Much empirical lierature dealing with the competitive environment hypothesis tends to find nonstationary behaviour and very high persistence in time series of company profits. We model profit time series using a simple time series model that allows for nonstationary behavior over subsamples, but overall mean reversion. Using a new dataset constisting of profits for more than 150 US companies over a time period of 50 years, we present statistical evidence that the high persistence observed in profits when using linear autoregressive models is often due to the misspecification of the data generating process.