Relationships between balance sheet compositions, profitability, firm size and industry: a study of the Thai manufacturing corporate sector

This paper examines some commonly hypothesised relationships between balance sheet composition and profitability, firm size and industry in the context of the Thai manufacturing corporate sector. These relationships are examined prior to, during, and after the 1997 economic crisis. Decomposition Measures (DM) are used to represent balance sheet composition. It is found that average DM during the crisis are higher than the pre- and post-crisis for all industries, because of the deterioration of the firms' financial conditions during the period. Average DM are significantly higher for the less profitable firms in all three sub-periods, with more pronounced effect during-crisis. Larger average DM are also seen in the durable goods industries in all three subperiods because the firms in those industries had more volatility in demand. Small firms are seen to have larger average DM prior to and after the crisis. However, the effect of size is not significant during the crisis, indicating that firms of all sizes were similarly affected.