A dynamic panel analysis of the profitability of Australian tax entities
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Date
2000-11Affiliation
Economics and Commerce: Melbourne Institute of Applied Economic and Social ResearchMetadata
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Feeny, Simon and Harris, Mark N. and Loundes, Joanne (2000) A Dynamic Panel Analysis of the Profitability of Australian Tax Entities.Access Status
Open AccessDescription
This paper is the result of work being undertaken as part of a collaborative researchprogram entitled 'The Performance of Australian Enterprises: Innovation, Productivityand Profitability'. This project is generously supported by the Australian ResearchCouncil and the following collaborative partners: The Australian Tax Office,Commonwealth Office of Small Business, IBIS Business Information Pty Ltd,Productivity Commission, and Victorian Department of State Development. The viewsexpressed in this paper represent those of the authors and not necessarily the views of the collaborative partners. We are grateful to David Prentice and John Creedy forhelpful comments.
Abstract
This paper investigates the determinants of profitability of Australian tax entities over the period 1993/94 to 1996/97 for each of 91 three-digit ANZSIC industries. The theoretical model is based on that of Cowling and Waterson (1976). However, it is augmented by the inclusion of lagged profitability to allow for habit persistence in entity profitability. The so-called operational Wansbeek-Bekker estimator is used to control for endogeneity of this lagged dependent variable, whilst simultaneously controlling for observed and unobserved entity heterogeneity. Aggregate results suggest that profitability in the previous year, entity capital intensity, and barriers to entry have the expected positive association with current profitability measured by the price-cost margin. Entity market share-and to a lesser extent concentration-are found to have a U shaped relationship with profitability.