How does the effect of external financing on profitability differ across tiers? Evidence from the automotive supply chain

Result code in IS VaVaI

<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F23%3A10465696" target="_blank" >RIV/00216208:11230/23:10465696 - isvavai.cz</a>

Alternative codes found

RIV/60460709:41110/23:94649

Result on the web

<a href="https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=bJR3h93VKf" target="_blank" >https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=bJR3h93VKf</a>

DOI - Digital Object Identifier

<a href="http://dx.doi.org/10.15240/tul/001/2023-2-007" target="_blank" >10.15240/tul/001/2023-2-007</a>

Result language

angličtina

Original language name

How does the effect of external financing on profitability differ across tiers? Evidence from the automotive supply chain

Original language description

Due to the importance of automotive industry for the Czech Republic (in a broader sense for European countries) and due to the unprecedented development of both national and European economies caused by the COVID-19 outbreak, also having implications on the financial sector, we aim to explore the main determinants of operating performance within the automotive supply chain. This study is based on the data sample composed of complete individual financial statements (audited if available) of firms conducting their business in the Czech Republic from 2011 to 2018 and belonging to the automotive supply chain. This supply chain is defined as (sub) deliveries of the Czech automotive industry represented mainly by companies classified under NACE 22, 27, 25, 24. The hypothesis claiming that the investment and leverage-based variables are the important drivers of operating profitability was only partly confirmed (valid predominantly for Tier 3), which shows that the supply chain organization also plays a crucial role as well as (valid for Tier 1). Also, we have shown (illustrated) that the assumption of different capital structures among tiers is valid. The average overall indebtedness of Tier 3 is higher by approximately 50% (altogether, the short- and long-term leverage are higher by 40% and 62% respectively) than Tier 1 firms. The need for relatively high capital expenditures (applicable to Tier 1) and working capital investments (applicable to Tier 3) is partly facilitated by external funds reflected in the indebtedness, which is associated with the costs reducing overall low profits from these investments. The leverageprofitability relationship seems to be nonlinear for long-term debts contrary to short-term debts where the linear relationship prevails.

Czech name

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Czech description

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Type

J_imp - Article in a specialist periodical, which is included in the Web of Science database

CEP classification

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OECD FORD branch

50201 - Economic Theory

Project

—

Continuities

I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year

2023

Confidentiality

S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Name of the periodical

E+M. Ekonomie a Management

ISSN

1212-3609

e-ISSN

2336-5064

Volume of the periodical

26

Issue of the periodical within the volume

2

Country of publishing house

CZ - CZECH REPUBLIC

Number of pages

17

Pages from-to

105-121

UT code for WoS article

001011410800007

EID of the result in the Scopus database

2-s2.0-85161853944