Effects of Internal and External Factors on Accounting Profit of Firms: A Panel Data Analysis for GCC Companies

This study comprehensively analyzes the effects of internal (micro) and external (macro) factors on the accounting profit of firms in the manufacturing and service sectors of the Gulf Cooperation Council (GCC) countries. The study used balanced panel data of 56 firms in manufacturing sector and 51 firms in services sector for the period of 2013 to 2017. The estimation results of the fixed effect model show that there are five internal and five external factors that significantly affect the profitability of a firm in the manufacturing sector of the GCC countries. The fixed-effect model for the firms in the services sector shows that there are five internal and four external factors that significantly affect the profitability of the firm in this sector. The comparison of actual and estimated profit shows that there exists enough potential for higher profit for the firms in the manufacturing and service sector of the GCC countries.