Macroeconomic factors or firm-specific factors? An examination of the impact on corporate profitability before, during and after the global financial crisis

Content Partner: Lincoln University. The purpose of this paper is to examine the impact of macroeconomic variables and firm-specific factors on corporate profitability in Singapore and Hong Kong before, during and after the global financial crisis. This paper uses the two-step system Generalized Method of Moments to examine the impact of macroeconomic and firm-specific factors on corporate profitability. The model includes firm-specific factors (firm size, leverage, liquidity, sales growth and previous year’s profitability) and macroeconomic factors (real GDP growth and inflation rate). Corporate profitability is represented by ROA, ROE and Tobin’s Q. Results from the pooled sample showed that past profitability, firm size and leverage have a strong relationship with firm performance. Our pooled sample results also showed that Hong Kong firms are more affected by macroeconomic factors during the global financial crisis than Singapore firms. Our study provides insights into the relationship between firm-specific factors, macroeconomic factors and firm performance under three different economic periods in two developed economies in the Asia-Pacific.