THE PANEL ANALYSIS OF PRODUCTIVITY AND PROFITABILITY OF DOMESTIC AND FOREIGN FIRMS

Many authors attempt to explain the relationship between the performance of firms and the foreign direct investments, however, the results seems country specific. This article is devoted to exploration of the impact of ownership on the profitability and the productivity of firms, which are in our study represented by variables return on sales, return on equity, and labour productivity as the commonly used measures for performance of firms. As a studied sample, the industrial firms operating in the Slovak Republic are used, which are divided according to the type of their ownership into two groups-domestic, and foreign. We analysed a panel data set of more than 2000 firms in the period of 16 years. We used a panel regression with pooled, fixed effects, as well as random effects to analyse the relationship between the performance measures and the ownership. To support the robustness of our results the weighted least squares and the least absolute deviation are performed as well. The results show that profitability and productivity of firms depend on the type of ownership, and confirm the fact that the presence of the foreign ownership in firms plays an important role, because it leads to higher productivity and profitability of firms.