Profitability in Portuguese service industries: a panel data approach

Abstract

Based on various panel models, we study the profitability determinants of Portuguese service industries. The results obtained show that profitability is persistent over time, and that for larger companies with greater growth, a lower level of debt and lower level of fixed assets are more profitable. Considering the results obtained, we can conclude that diversification of activities and motivation as well as the tendency to innovate contribute positively to increased profitability in Portuguese service industries, whereas the need to pay off debt charges periodically harms profitability. The government would be well advised to create special credit channels that would permit the greater growth of Portuguese service industries, especially those most inclined to innovate.