Book contents
- Frontmatter
- Contents
- Acknowledgments
- 1 The persistence of firms
- 2 The persistence of profits above the norm
- 3 The persistence of market power
- 4 Profitability and market structure
- 5 The results in perspective
- 6 Profitability and the firm's own advertising, patent activity, risk, and other characteristics
- 7 Profitability and managerial control and compensation
- 8 Mergers and profitability
- 9 Mergers and market share
- 10 The threads gathered and conclusions woven
- Appendix 1 Companies studied
- Appendix 2 Industry categories
- Appendix 3 Industry matchings
- Appendix 4 Assets acquired data (Chapter 7)
- Appendix 5 Mergers and market share: samples of merging companies
- Notes
- References
- Index
3 - The persistence of market power
Published online by Cambridge University Press: 04 May 2010
- Frontmatter
- Contents
- Acknowledgments
- 1 The persistence of firms
- 2 The persistence of profits above the norm
- 3 The persistence of market power
- 4 Profitability and market structure
- 5 The results in perspective
- 6 Profitability and the firm's own advertising, patent activity, risk, and other characteristics
- 7 Profitability and managerial control and compensation
- 8 Mergers and profitability
- 9 Mergers and market share
- 10 The threads gathered and conclusions woven
- Appendix 1 Companies studied
- Appendix 2 Industry categories
- Appendix 3 Industry matchings
- Appendix 4 Assets acquired data (Chapter 7)
- Appendix 5 Mergers and market share: samples of merging companies
- Notes
- References
- Index
Summary
The companies with persistently high or low profits
The previous chapter established the existence of persistent differences in profitability across firms over the 1950–72 period. What causes these differences in profits? To begin to answer this question, we list all companies having projected profits 50 percent or more above the average (Part A, Table 3.1), and all of those with projected returns 50 percent or more below the average (Part B). The projections are the as from the best fit of the three polynomials in l/t estimated in Chapter 2, since the a will become our dependent variable in all subsequent analysis. The firms are chosen from the 551-company subsample that is employed throughout most of the subsequent chapters.
Only firms with âs at least double their standard errors are included. In addition to the long-run projected profit rates for each company (â), we have included their profit rates for the first three years of the sample period, π50, and the sales-weighted average of their market shares in 1950, M50. Thus, on the basis of its profit performance over the 1950–72 period, Amalgamated Sugar was projected to earn a return on total assets 53 percent more than the average. Over the three years 1950–52, it earned 12 percent less than the average Its 1950 average market share was 2.4 percent. Companies with no M50 figure were not among the 1,000 largest companies of 1950.
- Type
- Chapter
- Information
- Profits in the Long Run , pp. 33 - 49Publisher: Cambridge University PressPrint publication year: 1986