An Empirical Explanation of Longitudinal Performance Profiles of Firms
Southern Business & Economic Journal
This study is an offshoot from the confluence of two streams of scholarship: (i) research that empirically debunks high-performance profiling of firms (impermanence of performance archetypes) and (ii) research that compares and contrasts temporal performance profiles of firms. We gather data from 405 firms: firms of consistently growing ROE (201 firms) and firms of consistently declining ROE (204 firms) over the 2010-2014 time period. We then empirically test the differences between these two groups of firms in terms of a number of firm level resource allocation and management decisions. Our findings reveal that firms of consistently growing ROE differ from firms of consistently declining ROE in that they have lower level of advertising expenditures and higher level of capital expenditures; and they also exhibit more efficient working capital management. However, R&D expenditures did not show any statistically significant differences between the two groups. Our paper concludes with discussion, limitations and implications of our findings.
Hahn, TeWhan; Chinta, Ravi; and Kasem, Abdullah, "An Empirical Explanation of Longitudinal Performance Profiles of Firms" (2016). HCBE Faculty Articles. 1068.