DETERMINANTS OF CORPORATE PROFITABILITY OF COMPANIES FROM CONSTRUCTION AND REAL ESTATE INDUSTRIES IN SELECTED EUROPEAN COUNTRIES

Abstract

The basic economic rule in any business should be profit maximization and also each business entity establishes a company in order to generate profit from invested funds. So, profitability indicators have a significant position among the criteria of economic activity. Achieving profitability is influenced by a myriad of determinants. This study focuses on some external determinants. The subjects of the research are companies from eight European economies, which come from two sectors, namely construction and real estate activities, which are divided into twelve groups according to the NACE classification. The aim of the research is to use Generalized Method of Moments to find out whether selected determinants affect corporate profitability or not. The determinants are as follows: GDP growth rate, inflation rate, basic interest rate, unemployment rate, gross fixed capital formation. The research covers the period 2010–2018. In total, over 89,000 companies are surveyed. There is at least one main finding, namely the greatest influence on the level of profitability in the construction and real estate activities sectors has the basic interest rates of individual economies and that this effect is mostly negative. Keywords: