Factors Affecting Corporate Performance in Countries and Industries
First, the procedure of the factor analysis was conducted on the objects treated as industries in countries in order to initially verify the number of factors. Since the use of Kaiser’s criterion would lead to retaining too many factors (eight), difficult
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Factors Affecting Corporate Performance in Countries and Industries
5.1
Factors Influencing Corporate Performance in Countries and Industries
First, the procedure of the factor analysis was conducted on the objects treated as industries in countries in order to initially verify the number of factors. Since the use of Kaiser’s criterion would lead to retaining too many factors (eight), difficult to interpret and not simplifying the data structure significantly, the Cattell’s scree plot test shown in Fig. 5.1. was applied in order to determine the optimal number of factors. According to this test, the first four factors should be retained, as that is where the scree plot shows a separation between the most important components and the less important ones. After taking into account the readability of the factors, only the first three of them were retained for further analysis. Although the first three factors (from the total of eight, for which the eigenvalues are greater than 1.0) explain only a little more than half of the total variance, as shown in Table 5.1, their contribution in explaining the total variance exceed 10 % in each case, which was also taken into account when selecting the factors. The values of the factor loadings, shown in Table 5.2, show which variables affect the retained factors. In order to obtain a clear structure of the factor loadings (also referred to as the simple structure), i.e. such factors which are characterised by high loadings with some variables and low with the other, a procedure of factor rotation was employed (Comrey & Lee, 1992). Of the many available rotation strategies, the most commonly used method of Varimax normalised was applied. As shown in the Table 5.2., only few variables are significantly correlated with the factors. The first factor is positively correlated with the return on sales, and negatively with the total assets turnover and fixed assets turnover, as well as the ratio of assets elasticity. The second factor is related to the profitability of assets, current liquidity, interest cover ratio and the relation of long-term debt to equity. The third factor is positively correlated with the ratios of costs of sales to turnover,
J. Koralun-Berez´nicka, Corporate Performance, Contributions to Management Science, 111 DOI 10.1007/978-3-319-00345-0_5, # Springer International Publishing Switzerland 2013
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5 Factors Affecting Corporate Performance in Countries and Industries 9 8 7
Eigenvalue
6 5 4 3 2 1 0 Number of eigenvalue
Fig. 5.1 Scree plot test for industries in countries (Source: Calculations based on BACH database) Table 5.1 Eigenvalues of factors for industries in countries % of total Factor Eigenvalue variance 1 8.159 25.50 2 4.896 15.30 3 4.005 12.52 4 2.626 8.21 5 2.376 7.42 6 1.385 4.33 7 1.285 4.01 8 1.156 3.61 Source: Calculations based on BACH database
Cumulative eigenvalue 8.16 13.06 17.06 19.69 22.06 23.45 24.73 25.89
Cumulative % of total variance 25.50 40.80 53.31 61.52 68.94 73.27 77.29 80.90
added value to turnover and inventory to wo
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