Exploring Factors Influencing Firm Profitability: The Case of the Meat Industry in Portugal

Abstract

The study examines the profitability of the meat industry in Portugal and its determining factors. Annual financial data of the Portuguese firms are collected from the database Analysis System of Iberian Balance Sheets from 2014 to 2020. Based on 1,631 observations, one dependent variable and four groups of independent variables are tested using estimation methods, i.e., Pooled Ordinary Least Square and Fixed Effects and Generalised Method of Moments. The empirical evidence shows that firm size and tangible assets have significant impacts on firm profitability. Besides, profitability is persistent, implying that the continuous nature of profitability over time provides a firm with an advantage in capturing new opportunities to improve its performance. However, external factors show no effects on firm profitability. In general, the capability to manage assets and liabilities flexibly is highly related to profitability, enabling the firms to prosper after the financial crisis. Therefore, the paper provides useful information for stakeholders in considering solutions to improve firms´ resilience and profitability while facing unfavourable economic conditions.