An Investigation of ROCE and Its Drivers: Empirical Analysis of European Companies

Research output: Chapter in Book/Report/Conference proceedingsChapter

3 Citations (Scopus)

Abstract

The quest for value and profitability has attracted substantial interest among researchers and managers over the last decades. Even though many studies have been conducted most companies struggle to provide competitive returns. The golden path of being profitable has not yet been unveiled. This article analyses the long-term profitability and its drivers based on a sample of 23,489 European manufacturing companies, from 2000 to 2008. The empirical study reveals that companies have not been able to increase revenues and the Return on Capital Employed (ROCE) simultaneously. However, statistically significant differences were found among industries, countries, and between small and large companies. Furthermore the paper presents the correlation between the drivers of profitability and the impact of value drivers on ROCE. The study illustrates that growth strategies, without managing cost and assets effectively cannot provide profitability.
Original languageEnglish
Title of host publicationContributions to Management Science
PublisherSpringer
Pages119-148
Number of pages30
ISBN (Print)978-3-7908-2746-0
DOIs
Publication statusPublished - 2012

Publication series

NameContributions to Management Science
ISSN (Print)1431-1941
ISSN (Electronic)2197-716X

Keywords

  • C2C-Cycle
  • EVA
  • Profitability
  • Return on capital employed
  • Revenue growth
  • Shareholder value
  • Value driver

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