On the profitability of large Spanish corporations : return on asset and its components

Abstract

In the present work we analyze the profit and growth rates of the largest companies in Spain in an aggregate way during the last eleven years. Throughout the data of the around five hundred largest surviving firms, taking their total assets, operating revenue, number of employees, and economic profitability, we show that there is a convergence between the profit rates, rather than growth rates, of the large companies, due to the reallocation of capital to the profitable ventures and sectors. Finally, we conclude that surviving companies face the same profitability benchmark with the same economic environment, so it seems to be fair the interpretation that the idiosyncratic efforts to get major benefits disappear in the long term, resulting a common profitability rate through the years.