The Determinants of Profitability: Evidence from Croatian Construction Sector

  • Abstract:

    This article investigates the determinants of profitability for construction companies in Croatia. Sample includes more than 8678 construction companies covering the period from 2003 to 2014 what present 11 years of observation including Croatian milestone in joining to the European Union as well as global financial crises. The authors analyze theoretical background and use empirical research to investigate the relation between profitability and selected determinants like price cost margin, concentration index, growth, size, material costs and lagged profitability. Special remarks are given with review of construction sector importance for the growth of the Croatian economy and repercussions of global financial crises. According to that, the empirical part of article use generalized method of moments for dynamic panel model which showed significant results. Overall, the results showed strong relationship between company size, concentration index, growth, lagged profitability and profitability besides number of employees.