Firm profitability determinants in the energy- related sectors of the ex-Yugoslavia countries - does the EU make a difference?

This paper analyzes the determinants of firm profitability in energy-related sectors. The analysis is conducted on the sample of firm-level data from 2008 to 2017, for the seven ex Yugoslavia countries (Bosnia and Herzegovina, Croatia, Kosovo, Macedonia, Montenegro, Serbia and Slovenia), of which two are member states of the European Union. The analysis considers standard firm profitability determinants such as company growth, liquidity, solvency and indebtedness, production factor productivities and their cost, including the cost of the materials used in the production, and finally, the indicator of export intensity. The paper tests whether there is a significant difference between the profitability determinants of the two subsamples, namely, the countries that are EU member states, compared to those that are not. The empirical analysis is conducted using the one-step difference GMM dynamic panel estimator and the sensitivity analysis using different methodological approaches as well as alternative measures of different indicators. The results suggest that company growth and liquidity do not significantly affect profitability. Debt plays a significant negative role, possibly more so in EU companies, but the results are not robust. Accumulation of physical capital is more important in the non-EU countries, while the same is true for labor in the EU companies of the sample. The role of material costs and export intensity depends on the accompanying measure of indebtedness used in the analysis. However, there is a possible positive effect of material cost, and a negative effect of export intensity in the EU compared to the non-EU companies.