Employees' compensation and profit persistence in emerging markets: empirical evidence from South Africa Online publication date: Tue, 25-Sep-2018
by Dinesh Jaisinghani
African J. of Economic and Sustainable Development (AJESD), Vol. 6, No. 4, 2017
Abstract: The main objective of the current study is to examine the nature of profit persistence and to estimate the relationship between employees' compensation and profitability for publicly listed firms in South Africa. The sample consists of 114 companies operating in South Africa for the period 2006 to 2013. Dynamic panel regression model, using the Arellano and Bond (1991) estimation technique, has been deployed to generate the results. The results highlight that there is positive profit persistence in South Africa. However, the degree of profit persistence is quite low and is below 0.2. The results also highlight that there is a nonlinear association between employees' compensation and profitability. The results signify that there may be few entry and exit barriers in South Africa and hence there are many bright prospects for multinationals to enter the market. The results also highlight that South African companies should focus on sustained investment in developing manpower resource in order to derive the benefits in the long-run.
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