Profitability, financial liquidity and the sustainable development of manufacturing enterprises in Poland

Abstract

Background: The sustainable development of enterprises means undertaking economic, social, and environmental actions. This development demands certain financial outlays for investments. In this context, maintaining financial liquidity and a high level of profitability is especially significant. These are the two key pillars of assessing the financial condition of enterprises, which stimulate their current process and stable development in the future. Research purpose: This paper aims to assess the impact of selected financial liquidity and profitability ratios on the sustainable development of the manufacturing enterprises sector in Poland between 2009 and 2019. Methods: I create models using the OLS estimation methods, vector autoregression (VAR), and seemingly unrelated regression (SUR) to verify the research hypotheses. Conclusions: The estimation results indicate a statistically significant impact of financial liquidity and profitability on the sustainable development of industrial enterprises. Moreover, the results of the SUR estimation show that both analysed areas have a different impact on all three pillars of the sustainable development of enterprises. Therefore, it must be concluded that maintaining a good financial condition, including liquidity and profitability, is essential for enterprises’ social and environmental investments.1