Value Drivers of Processing Industry Enterprises in the Czech Republic in the Years 2007-2011


  • Michal Karas
  • Michala Strnadová
  • Mária Režňáková


performance of enterprises, value drivers, return on equity, dynamic decomposition of the return on equity, logarithmic method, processing industry


Purpose of the article: The article strives to identify quantitative factors that positively or negatively influence the performance of enterprises and thus also their value (the so-called value drivers). Research was performed in processing industry enterprises in the Czech Republic which contribute about 25 per cent to the gross value added in the CR. Methodology/methods: The principal research method is the logarithmic decomposition of the ROE. In the analysis, data from the processing industry enterprises from the years 2007–2011 were used. The data were aggregated for the purposes of the calculation. Because Grubbs test confirmed the existence of extreme outliers in the sample, a 5% Winsorized mean was used in the aggregation. This approach makes it possible to identify the most important factors responsible for changes in enterprise performance. Scientific aim: The aim of the article is to identify value drivers of processing industry enterprises in the CR, i.e. factors that are responsible for the growth or decline in enterprise value. In view of the positive correlation between the value of an enterprise and its return on equity, the return on equity decomposition was used in the analysis. Findings: The results show that performance of industrial enterprises in the CR decreased as early as in 2008, the reason being lower profit rates (measured by operating margin). The decrease in profit rates was also evident in the negative effect of the debt load on the decrease in the ROE between 2008 and 2009, in spite of the decreasing interest rates. This leads to an unambiguous conclusion that industrial companies failed to adjust their cost structure to the decrease in demand, which caused a marked decrease in their performance. Conclusions: Research results identified the decisive factors influencing the change in the performance of enterprises in the years 2007 to 2011, which can be considered positive or negative value drivers.