Academic journal article Business: Theory and Practice

Establishing a Set of Macroeconomic Factors Explaining Variation over Time of Performance in Business Sectors

Academic journal article Business: Theory and Practice

Establishing a Set of Macroeconomic Factors Explaining Variation over Time of Performance in Business Sectors

Article excerpt

Introduction

In Lithuania, the financial indicators approach is often used to forecast probability of bankruptcy of Lithuanian companies. As a rule, models of discriminant analysis, which are more suitable than regression analysis, are applied. In addition to the above forecasting models intended for assessment of companies' situation, it is recommended to apply additional approaches based on the assessment of absolute and relative financial indicators. The analysis of companies' competitiveness also often lacks more detailed factors of external environment, explaining variation over time of corporate financial indicators, taking into consideration specific character of individual business sectors, and researches based on targeted and comprehensive approach. The problem is that so far major attention was paid to the impact of the external environment factors on the stock market and companies operating therein (Tvaronaviciene, Michailova 2006; Boreikis, Plinkus 2009; Danilenko 2009; Plinkus 2010; Zvirblis, Rimkeviciute 2012, et al.) and to the researches aimed at the assessment of bankruptcy probability on the basis of financial indicators, while efforts to assess the links between macroeconomic factors and financial performance indicators of individual economic units (companies or business sectors) were lacking. Therefore, it is appropriate to identify and examine an exhaustive set of individual external environment factors that are most significant to specific economic activities, as a research object. The purpose of this study is, hence, to identify and analyse individual external environment factors most important for specific economic activities that would allow explaining the variation over time of corporate financial indicators. The analysis performed for the purpose of the pursued obj ective is based on official public statistics. Correlation-regression analysis methods are also applied.

1. Overview of the theory concerning appraisal of an economic unit's performance

The modern business environment is defined by competitiveness. Companies find it increasingly important to analyse their financial positions and appraise their performance with a view to assessing their market shares and future development prospects. (Martisius, A. S., Martisius, M. 2008). The analysis of academic literature shows that financial statements by companies reflect their current situation with a 70-80% reliability and can be used to analyse their performance (Janovic 2012). To make proper use of the information disclosed in the financial statements, financial performance indicators of the companies should be analysed and the factors that affect their variation over time should be identified. In Lithuania, these issues have been discussed by Bagdziuniene (2005), Juozaitiene (2000), Lazauskas (2005) and Mackevicius (2005, 2008, 2010). Gokcehan Demirhan and Anwar (2014) emphasise that in the framework of assessment of the factors affecting business performance the analysis of both internal and external factors is relevant.

I. Arbidane and J. Volkova (2012) concluded that researchers tend to focus on the analysis of internal and external factors when examining management processes in the companies. To assess a company's performance indicators (including financial performance indicators) specific factors of macroeconomic environment that influence the company must be identified (Franceschini et al. 2014). Given the increasing influence of external factors on companies' performance, the approaches commonly used are PEST or SWOT analyses which reveal external factors-related opportunities and threats (Auskalnyte, Ginevicius 2001). R. Beker (2012) states that in the recent years, in Lithuania much attention has been paid to the analysis of business profitability of the companies, while comprehensive studies covering external factors and their impact on the companies' performance (e.g. profitability) are often lacking. …

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