Firm-specific factors and financial performance of firms in the Czech Republic

CHANDRAPALA PATHIRAWASAM, KNAPKOVA ADRIANA: Firm-specifi c factors and fi nancial performance of fi rms in the Czech Republic. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2013, LXI, No. 7, pp. 2183–2190 The objective of this study is to investigate the role of internal factors in generating fi nancial performance of fi rms in the Czech Republic. The paper examines the impact of fi rm specifi c factors on company fi nancial performance of 974 fi rms in the Czech Republic over the period 2005 to 2008, using data in the Albertina database. Pooled and panel cross-sectional time series techniques are used for the data analysis. Return on Assets (ROA) is the dependent variable of the model and eight fi rm specifi c factors are introduced as the explanatory variables. Using Return on Assets as the dependent variable, it is established that the fi rm size, sales growth and capital turnover are having signifi cant positive impact on fi nancial performance of fi rms. At the same time, debt ratio and inventory refl ect signifi cant negative impact on fi nancial performance of fi rms. Overall explanatory powers of the two models are low and further research is necessary to increase the statistical power of the model. The results from the present study may be very encouraging and useful for managers as well as investors to plan investment and operational activities to achieve profi tability objectives more effi ciently and eff ectively. The fi ndings have important managerial implications. fi nancial performance, Czech Republic, return on assets (ROA), fi rm specifi c factors