Kristina Mijić, Daniela Nuševa, Dejan Jakšić

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The purpose of this paper is to investigate the determinants of profitability for small and medium-sized enterprises (SMEs) in the wholesale and retail sector in the Republic of Serbia. The wholesale and retail sector is a very important sector for Serbian economy, and also one of the most profitable sectors. The research of determinants of profitability includes two phases. First, the differences between the profitability of SMEs and large enterprises were conducted using the Student t-test. Second, the panel data estimation techniques were used to detect determinants of firm profitability. The profitability measure is based on the return on assets, and the determinants of profitability were defined as follows: size, leverage, liquidity, tangibility, investment, sales growth and lagged profitability. The data was collected from the financial statement of enterprises. For this purpose, 9,005 observations of 1,801 SMEs and 1,605 observations of 321 large trade companies over the period of 2010-2014 were included. The results indicate that SMEs achieve statistically significant better profitability than large wholesale and retail companies. The findings indicate that leverage, liquidity, sales growth and lagged profitability positively influence the profitability of SMEs. Furthermore, the results show an inverse relationship between the size and tangibility on  one side and profitability on the other side.   


Return on assets (ROA), SMEs, profitability determinants, trade companies.

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