Factors Impact on Profitability for Norwegian Private Firms

Abstract

This paper investigates what factors have an impact on the profitability of Norwegian private firms divided by size. Profitability is measured using Return on Assets (ROA) and Return on Equity (ROE). The factors tested are: Female CEO, Female in Board, Family Firms, Tenure, CEO Salary, Capital Structure, and Research & Development (R&D). The Centre for Corporate Governance Research has provided both accounting- and corporate governance data for the period 2000 to 2015. We find that Female CEOs, Female board members, and Tenure have a negative effect on ROA and ROE for Micro firms. Family firms in this category generates a higher ROA than nonfamily firms, and the results for Capital Structure shows that ROE decreases if the firms’ long-term debt increases. For Small firms, Tenure has a positive effect on ROA. On the other hand, R&D has a negative effect on ROA. We find no such effect on ROE for Small firms. For the Medium & Large firms, none of the factors tested have any effect on neither ROA nor ROE. The findings are considered robust to alternative definitions, measures, and regression models.