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Abnormal Profits and Profit Persistence: Evidence from the European Food Industry Institut für Lebensmittel- und Ressourcenökonomik der Rheinischen Friedrich-Wilhelms-Universität Bonn Abnormal profits and profit persistence: evidence from the European food industry Inaugural-Dissertation zur Erlangung des Grades Doktor der Agrarwissenschaften (Dr. agr.) der Landwirtschaftlichen Fakultät der Rheinischen Friedrich-Wilhelms-Universität Bonn vorgelegt am 01.Oktober 2013 von Stefan Hirsch aus Bonn Referentin: Prof. Dr. Monika Hartmann Korreferenten: Prof. Dr. Thomas Heckelei Prof. Dr. Christian Fischer Tag der mündlichen Prüfung: 04.04.2014 Erscheinungsjahr: 2014 Danksagung An dieser Stelle möchte ich mich bei all denen bedanken, die mich bei der Fertigstellung dieser Dissertation unterstützt haben. Zunächst danke ich Frau Prof. Dr. Hartmann, dass sie mir die Möglichkeit gegeben hat, die mir im Volkswirtschaftsstudium vermittelten Inhalte, welche sehr theoretisch geprägt waren, in einem stärker praxisorientierten Bereich anzuwenden. Außerdem danke ich ihr für die Betreuung der Dissertation und ihre stets hilfreichen Anregungen und Ratschläge. Besonders möchte ich mich auch bei Herrn Prof. Dr. Thomas Heckelei für die Übernahme des Korreferats und für seine Unterstützung während dem Anfertigen der Dissertation bedanken. Bei Frau Dr. Adelina Gschwandtner bedanke ich mich für die erfolgreiche Zusammenarbeit, welche sich hoffentlich in der Zukunft fortsetzten wird. Es war mir stets eine Freude nach Wien zu kommen. Allen ehemaligen und aktuellen Kollegen/innen am Institut für Lebensmittel- und Ressourcenökonomik (ILR) danke ich für die äußerst nette Zusammenarbeit in den letzten Jahren. Im Rahmen zahlreicher Doktorandenseminare und Diskussionen in kleineren Gruppen entstanden diverse Ideen, die sich in dieser Dissertation wiederfinden. Zu guter Letzt danke ich meiner Mutter, meinen Brüdern und dem Rest meiner Familie für ihre Unterstützung. Kurzfassung: Abnormale Gewinne und deren Persistenz: Eine Analyse der europäischen Lebensmittelindustrie Die vorliegende Dissertation untersucht die europäische Lebensmittelindustrie im Hinblick auf Unternehmensgewinne, welche von der Wettbewerbsnorm abweichen. Hierbei wird im Rahmen dreier wissenschaftlicher Papiere sowohl das Auftreten solcher ‚abnormalen‘ Gewinne zu einem bestimmten Zeitpunkt als auch deren Persistenz über längere Zeitperioden analysiert. Da es sich um eine der ersten Studien dieser Art handelt, welche sich ausschließlich mit Firmen der europäischen Lebensmittelindustrie befasst, liefert diese Dissertation einen wichtigen Beitrag zur Literatur. Im Anschluss an eine ausführliche Einleitung wird im ersten Papier der Einfluss von Firmen-, Industrie-, Jahres- und Ländereffekten auf das Ausmaß der abnormalen Gewinne analysiert. Die Schätzung der Effektklassen erfolgt hierbei sowohl auf Basis konventioneller Methoden wie ANOVA oder Varianzkomponentenanalyse als auch durch ein hierarchisches, lineares Modell (HLM). Der HLM-Ansatz bietet darüber hinaus die Möglichkeit den Einfluss struktureller Firmen- und Industrievariablen auf das Ausmaß der abnormalen Gewinne zu schätzen. Die drei Methoden führen zu dem gemeinsamen Ergebnis, dass Firmeneffekte der wichtigste Einflussfaktor sind wohingegen Industrieeffekte eine vernachlässigbare Rolle spielen. Unter den strukturellen Firmen- und Industrievariablen stellt sich die Firmengröße als positiver Einflussfaktor heraus, während Firmenrisiko, das Alter der Firmen und die Wachstumsrate der Industrie einen negativen Einfluss auf die Höhe der abnormalen Gewinne haben. Während im ersten Papier das Auftreten abnormaler Gewinne zu einem bestimmten Zeitpunkt analysiert wird, befasst sich das zweite Papier mit der Persistenz abnormaler Gewinne über längere Zeitperioden. Diese Analyse basiert sowohl auf autoregressiven Modellen (AR) sowie einem dynamischen Panelmodell. Beide Ansätze ermöglichen es zusätzlich den Einfluss struktureller Firmen- und Industrievariablen auf die Höhe der Profitpersistenz zu bestimmen. Die Analyse führt zu dem Ergebnis, dass eine hohe Anzahl an Firmen langfristig abnormale Gewinne erwirtschaftet. Jedoch führen starker Wettbewerb und eine hohe Konzentration im Lebensmitteleinzelhandel dazu, dass das Ausmaß der Persistenz geringer ausfällt als in anderen Industriesektoren. Des Weiteren stellen sich das Firmenrisiko, Firmenalter sowie der F&E Aufwand der Industrie als negative Einflussgrößen heraus. Die Firmengröße hingegen hat einen positiven Einfluss auf das Ausmaß der Persistenz. i Die ersten beiden Papiere basieren auf einer Stichprobe von 5.494 Lebensmittelproduzenten aus den fünf Ländern Belgien, Frankreich, Italien, Spanien und Großbritannien. Im dritten Papier wird hingegen eine Stichprobe von 590 Firmen des Milchsektors im Hinblick auf Profitpersistenz analysiert. Der Milchsektor wurde hierbei zum einen aufgrund seiner hohen wirtschaftlichen Relevanz im Ernährungsgewerbe als auch aufgrund seiner speziellen strukturellen Charakteristika ausgewählt. Zu diesen zählen u.a. eine hohe Anzahl an Genossenschaften sowie eine starke Regulierung durch die Gemeinsame Agrarpolitik (GAP) der EU. Die AR Modelle führen zu dem Ergebnis, dass Genossenschaften, welche in etwa einen Anteil von 20 % der Firmen im Sektor ausmachen, nicht in erster Linie gewinnorientiert sind. Analog zur gesamten Lebensmittelindustrie deuten die Ergebnisse auf eine hohe Wettbewerbsintensität, da das Ausmaß der Persistenz auch nach einem Ausschluss der Genossenschaften aus der Analyse gering ausfällt. Auch im Milchsektor stellt sich Firmengröße als positiver Einflussfaktor heraus, wohingegen Firmenrisiko, -alter sowie das Wachstum und die F&E Aufwendungen des Sektors einen negativen Einfluss haben. Gleiches gilt für die Konzentration im Lebensmitteleinzelhandel, welche als Indikator für dessen Verhandlungsmacht gesehen werden kann. ii Abstract: Abnormal profits and profit persistence: evidence from the European food industry This thesis comprises three papers that aim to analyze the phenomenon of firm profits in the European food industry that differ from the competitive norm either at a specific point in time or over longer time periods. The thesis adds to existing literature as it is one of the first studies of this type that directly focuses on the European food industry. Following an extended introduction, the first paper estimates the relative importance of firm, industry, country and year effects as drivers for profit deviations from the competitive norm at a specific point in time which are also commonly named ‘abnormal profits’. Besides conventional approaches such as ANOVA or components of variance, a hierarchical linear model (HLM) is implemented. The HLM approach additionally provides the possibility to estimate the impact of structural firm and industry variables on the degree of abnormal profits. All three approaches lead to the result that firm effects are the most important driver for abnormal profits while industry effects only play a minor role. Among the structural firm and industry variables it is in particular the size of firms’ that positively influences the degree of abnormal profits. On the other hand, firm risk and age as well as the growth rate of the industry in which firms operate have a negative impact. While the first paper focuses on abnormal profits at a specific point in time, the second paper analyzes the persistence of abnormal firm profits over longer time periods. This analysis is based on autoregressive models (AR) as well as Arellano-Bond dynamic panel estimation. Both approaches additionally allow for the identification of the firm and industry characteristics that determine the degree of profit persistence. The estimation reveals that a significant number of firms generate abnormal profits that persist in the long run. However, as competition among food industry firms is strong and concentration in the downstream market is high, persistence in abnormal profits in the food industry tends to be lower in comparison to other manufacturing sectors. Further characteristics that have a negative influence on the degree of persistence are firm age and risk as well as the industries R&D intensity. Similar to the occurrence of abnormal profits at a specific point in time, firm size is estimated to have a positive impact on the persistence of such profits. The first two papers of the thesis are based on a sample of 5,494 food processors from the five countries: Belgium, France, Italy, Spain and the United Kingdom. The third paper also uses AR models and dynamic panel estimation to analyze a sample of 590 dairy processors from the same five countries. Here the dairy industry was chosen not only because iii of its economic importance within the food industry but also due to its special structural features such as a high number of cooperatives and a strong regulation of economic activity by the Common Agricultural Policy (CAP). The AR models reveal that cooperatives, which account for approximately 20 % of all firms in the sector, are not predominantly profit oriented. Similar to the entire food industry the results indicate strong competition as the degree of persistence remains low even when cooperatives are removed from the sample. Again firm size turns out to be an important driver for persistence. Firm age and risk as well as growth and R&D investment of the sector have a negative impact. The same holds for the level of concentration in the retail sector which is an indicator of the retailers’ bargaining power. iv Abbreviations AMADEUS Analyse MAjor Databases from EUropean Sources ANOVA Analysis of variance
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