Research On Entrepreneurial Profitability And Profit Persistence Of Chinese Manufactory Listed Companies

The level of corporate profitability and the degree of profit persistence matter its survival.How to improve the level of corporate profit and sustain competitive advantage is not only the answer that entrepreneurs quest,but also the problem that management scholars efforts to crack.It is generally agreed that both industry structures and the availability and utilization of internal corporate resources are two of the main determinants of profitability, but the theories behind industrial organization and resource-based are very much opposed as to which structure is most crucial in maximizing profit persistence. The former believes that the role of industry effects are more important, while the latter agrees that firm effects are more significant.In recent years, the combined factors of increasing costs and the deepening levels of corporate globalization have combined to gradually increase uncertainty in the marketplace. Industrial structures have also had to endure the enormous challenges of both transforming and upgrading simultaneously. These challenges, all coming together in a relatively short space of time, have posed a serious challenge to the future development of Chinese enterprises. In this new business environment, the question of how to consistently improve the levels of corporate profitability is the one every Chinese entrepreneur is considering, and the comparative study of profit and its persistence has significant practical implications.As a pillar industry of the national economy as well as the important foundation of economic and social development, the manufactory is the dominant sector of China’s economic growth and the basis of economic restructuring. Manufactory is also the main channel of China’s urban employment the concentrated expression of international competitiveness. Based on the main idea of industrial organization and resource-based theory, the paper select the return on total assets(ROA),return on equity(ROE) and Tobin’s Q value as the measure of corporate, establish the divided models of profit and auto-regressive time series model.This study examines the relative importance of the degrees of industry and firm effects on the profit and its persistence of a large sample of Chinese manufacturing listed companies based in the Shanghai and Shenzhen A-share market between2003and2012,which lasted six years at least.The empirical results show that all of year, industry and firm effects impact corporate profitability and its persistence positively, and are not only helpful to continuously improvement of corporate profitability for high performers, but also helpful to the quickly turnaround for low performers. Compared to the value index, the results based on the analysis of financial indicators show that industry effects are more important. Although there are the influence of industry effects, the internal factors contribute more to manufactory industry listed companies’profitability and its persistence. The study also find that there are different on the impact of industry effects and firm effects to different performers. The industry effects are more important to low performers,while the influence of firm effects are more significance to high performers. In addition, the mechanism of year, industry and firm level factors are different to enterprises in different country and different industry.