European Integrat ion Studies2022/16 150 Abstract Impact of Intellectual Capital Efficiency on Growth Rate and Profitability of a Company: Nasdaq Baltic Case http://dx.doi.org/10.5755/j01.eis.1.16.31492 Nellija Titova RISEBA University of Applied Sciences, Latvia Biruta Sloka University of Latvia, Latvia European Integration Studies No. 16 / 2022, pp. 150-165 doi.org/10.5755/j01.eis.0.16.31492 Introduction Submitted 04/2022 Accepted for publication 06/2022 Impact of Intellectual Capital Efficiency on Growth Rate and Profitability of a Company: Nasdaq Baltic Case EIS 16/2022 Research on intellectual capital (IC), while realizing the fact the investments or spending on IC that can either create or destroy value, during the last decade has changed the focus from analysis of companies IC meta system to analysis of ecosystem and company as part of framework. Intellectual capital (IC) analysis that as an academic discipline has evolved and exceled since early 90’s has reached the fourth stage of the research. Purpose of the study: Investigate the level of relationship between intellectual capital and its com- ponents and sales / growth rate and profitability of the companies; identifies dominating significant con- stituents in NASDAQ Baltic companies. Tasks: a) to identify intellectual capital and business performance ratios for the analysis, b) choose normalisations proxies, set number of control and moderate variables and period of impact to evaluate. Primary research methods: panel time-series sample of 92 companies and a 6-year observation of companies listed on the Baltic Stock Exchange between 2013 and 2019. This article contributes to the development of Intellectual Capital Theory, Value-Based Management Theory and Resource-View Theory. Elaborating on the analysis of the financial statements, as audited and public data, thorough analysis of the companies’ intellectual capital and its components has been undertaken improving the methodology of the evaluation of the impact, identifying research gaps and expanding the theoretical impact models. This study reveals a significant and positive relationship between Intellectual Capital and its components and sales / growth rate and profitability of the companies; identifies dominating significant constituents in NASDAQ Baltic companies. Expanding number of IC components, number of control and moderate variables and, crucially, testing for approbation of normalization proxies and adjusting IC compo- nents for value added or assets, provides thorough and accurate analysis of the impact. KEYWORDS: Intellectual capital, extended impact models. As IC has gained impetus in the leap jump period of the knowledge-based companies, growth rates and scale of such companies have been one of the entrepreneurial wonders. Capitalization of S&P 500 over recent years has been mostly driven by Intellectual Capital or intangible values. Researchers agree that the terms “intangible assets”, “trademark”, “good repute”, “intellectual property” in accounting and valuation activities do not cover everything that should be included in the new concept. It is about managers using intangible assets as a management object, and the main purpose of this activity is to increase the value of the company by involving previously unused reserves such as knowledge, competence, corporate structures, information technology, customer satisfaction, etc. Purpose of the study: Investigate the level of relationship between 151 European Integrat ion Studies 2022/16 intellectual capital and its components and sales / growth rate and profitability of the companies; identifies dominating significant constituents in NASDAQ Baltic companies. Tasks: a) to identify intellectual capital and business performance ratios for the analysis, b) choose normalisations proxies, set number of control and moderate variables and period of impact to evaluate. Primary research methods: panel time-series sample of 92 companies and a 6-year observation of com- panies listed on the Baltic Stock Exchange between 2013 and 2019. Intellectual capital as serious research item was recognised only in the beginning of eighties last century as in the most recognised database SCOPUS there started to be indexed scientific papers on intellectual capital: in 1981 – 1 paper; in 1984 – 3 papers. Since that time it was expanding exponentially reaching 507 scientific papers indexed in SCOPUS in 2021. In first four months in 2022 it was already indexed 177 scientific issues (SCOPUS, 2022). The dynamics of the research on intellectual capital (IC) is included in Figure 1. Theoretical background Figure 1 Dynamics of the research on Intellectual Capital indexed in SCOPUS, 1980 -2021 (SCOPUS, 2022) 0 100 200 300 400 500 600 1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627282930313233343536373839404142 The dynamics shows positive and exponential growth. The research on IC is divided into four blocks reflecting the evolution and four stages of the research. At the first stage of the research, researchers were initially concerned with theory building and raising awareness, i.e., the value communication stage. The second stage was characterized by gathering evidence to justify IC as a management technology, i.e., IC measurement models‘ cre- ation and dynamics aspect. The third stage allowed us to understand IC in practice and is known for wide approbation ground of the models within the organizations and even nation-states. And finally, the fourth stage is a big step forward ecosystems and extended analysis of the company in the environment. The research before 1997 was sporadic, fragmented, and primarily based on case studies that call this period a non-science period. Analysis of the research on IC and other related peer-reviewed articles proves that composition and classification of IC is getting more extensive and richer (Ferenhof, et al, 2015) over the recent years. (see Figure 2.). First, the dominating structure of human capital and structural capital has dissolved confident- ly by introduction of the relational capital and in the light of recent transfer to the fourth stage of the research by introduction of the social capital. The two latter are still sometimes used as synonyms that they are not. Second, each of the four components stratified into numerous layers. Third, due to the proven fact of the components’ interrelations, in most of the cases the sub-capitals are not strictly affiliated to one or another capital group and due to the on-going European Integrat ion Studies2022/16 152 discussions on the definitions of the groups can also partly overlap. The numbers of definitions, classifications, measurement models, and target groups (Dumay, et al., 2015) using IC measure- ment systems are growing constantly. The initiative of IC research was presented by enterprises and commercial entities. Later models were also developed for the non-profit organisations, educational institutions and government bodies. Figure 2 Intellectual Capital co- citation analysis, 2016 -2020 Source: author’s construction from Scopus Stage: designation Period Focus and line of research Studies of reference 1st stage: Development of a theoretical framework End of the 1980s and the 1990s Focus: Organizational IC Line of research: IC focused on awareness of its importance in creating and managing a sustainable competitive advantage Kaplan and Norton (1992, 1996), Stewart and Losee (1994), Edvinsson and Malone (1997), Stewart (1997a, b), Sveiby (1997) 2nd stage: Development supported by empirical proof 2000 to the end of 2005 Focus: OIC Line of research: it is defined as a phase where approaches to measurement, management, and communication of IC are in evidence; more supported by empirical proof; conceptualization of specific aspects of IC, such as accounting, reports, and the measuring of IC; Different classifications are created which help to define and group the different methods of assessing IC Mouritsen et al. (2000), Baum et al. (2000), Sullivan (2000), Andersen and McLean (2000), Lev (2001), Chatzkel (2004), Bontis (2004), Andriessen (2004), Bounfour and Edvinsson (2005) 3rd stage Development of implications arising from use of IC in an organization’s management 2006 to 2010 Focus: OIC Line of research: practical analyses with more profound implications of IC management, considering different types of organization Mouritsen and Roslender (2009), Reed et al. (2006), Dean (2007), Schiuma and Lerro (2008) and Martín-de Castro (2014), 4th stage Development of RIC and NIC 2011 to the present day Focus: NIC and RIC Line of research: IC in the context of ecosystems, at the national and regional levels. Roos and O’Connor (2015), Beretta (2019), Vrontis (2020), Diez-Vial (2019), Aversano (2020) Source: Author’s update based on Pedro et al. (2018) elaboration based on Guthrie et al. (2012), Dumay and Garanina (2012, 2013), Labra and Sánchez (2013), Roos and O’Connor (2015) Table 1 Intellectual Capital research focus by stages 153 European Integrat ion Studies 2022/16 Intellectual Capital impact assessment explored within the number of the research papers rep- resented by Javornik, et. al. (2012), Jordao, et. al. (2018), Lin (2018), Nadeem, et. al. (2017), Pe- dro, et. al. (2018), Scafarto, et. al. (2016), Sardo, et. al. (2017), Khalique, et. al. (2020), Chen, et. al. (2020), Uslu (2020), Almutirat (2020) have shown the research gaps and opportunities for future research. Majority of the research are focusing on the profitability ratios, adjusting for value added and analysing current periods. Number of authors have indicated the gaps for the further research and methodological developments such as taking into account that number of the IC components is constantly growing, not yet clearly defined and overlapping Pedro, et. al. (2018) and Paoloni (2020), performance ratios have reached the number of 300 and there is a need for the composite ratios and selection of the limited amount of indicators according to the need of the particular target group (Barhatov, 2014), lack of longitudinal analysis as most of the research used static data and does not analyse the time span (when the impact can be seen in the future not in the same period Ulum, et. al. (2014); Vishnu & Gupta (2014); Bayraktaroglu, Calisir & Baskak (2019) and contradictions in the findings Morariu (2014), Sardo (2018), Scafatto (2016), Xu (2020) are all engines for the further research. The positive effects of IC have been studied and demonstrated in static models as generally positive. The research gaps are long-term dynamic analysis or longitudinal effect and a detailed analysis of the impact of IC components and in particular composite ratios. The number of ICs and indicators is increasing, the results are con- tradictory, and there is a lack of studies on control and moderator variables and normalization proxies within the impact models, which is providing space for manoeuvre the current study is addressing on IC component changes over time, meaning, direction and sign. Research questions: » What ratios to choose for the analysis of the performance of the companies of around 300 ratios on evaluation of the company available? » How do group performance indicators for the different purposes and target groups? » What are the Intellectual capital efficiency measures to use? » How to evaluate the impact of the efficiency of IC on the performance of the company? » How long does it take to see the intellectual capital impact (longitudinal analysis)? » How to choose between normalization proxies for the intellectual capital variables, i.e., choosing between adjustment for assets, value added, or sales revenue? Research methods used in the research are bibliographic analysis, comparative quantitative and qualitative analysis, constructed research samples and visualization, systematization of indica- tors and integrated coefficients, OLS panel regressions and longitudinal regressions. According to management theory, a company’s operations can be affected by a wide variety of factors, such as the industry, size, level of development, economic cycle, life cycle, etc., the author avoids the risks of interpreting influencing factors by all establishments on a ceteris paribus basis. The main objective of the current study is to analyse the influence of Intellectual Capital on the firm’s growth rate treating costs as investments. Conceptual models tested in international research have been improved by expanding the number of indicators in the impact analysis by adding composite co- efficients on the efficiency and financial side and the number of variables, control and moderator variables on the IC side, also testing normalization surrogates for each indicator, Comparative analysis and visualization of separate indicators, developing the possibilities of analysis and pro- moting the theory of resources and changing the perception of IC from a static to a dynamic view, an analysis of the impact of longitudinal intellectual capital efficiency has been performed, and a summary of the results and finally, the study is based on a unique database, and the IC data of companies in the Baltic region are used for comparative efficiency analysis for the first time. European Integrat ion Studies2022/16 154 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽4 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽5𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽6𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽7𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽8 𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑆𝑆𝑆𝑆𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽9𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼1 …𝐼𝐼𝐼𝐼 + 𝑒𝑒𝑒𝑒; 𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 𝑃𝑃𝑃𝑃𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸𝐷𝐷𝐷𝐷 = 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅&𝐷𝐷𝐷𝐷 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑅𝑅𝑅𝑅𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 + 𝑝𝑝𝑝𝑝𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝑝𝑝𝑝𝑝𝑐𝑐𝑐𝑐𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀ℎ𝐶𝐶𝐶𝐶 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑇𝑇𝑇𝑇 + 𝐵𝐵𝐵𝐵𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐷𝐷𝐷𝐷𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐹𝐹𝐹𝐹𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑅𝑅𝑅𝑅𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 (1) where: PERF – selected performance variables; HCE – human capital efficiency; RCE – relational capital efficiency; PrCE – protected capital efficiency; PCE – process capital efficiency; SCE – social capital efficiency; InCE – innovation capital efficiency; AGE – age control variable; SIZE – size control variable; LEV – leverage control variable; Dummy LV – Nasdaq Riga; Dummy LT – Nasdaq Vilnius; Dummy EST – Nasdaq Tallinn; Dummy main list – Companies in Nasdaq Main list Dummy industry 1…n – Dummies for each NACE industry T – current period; I – Nasdaq companies; εi,t is the error. Human Capital Efficiency (Sobakinova, et. al.; 2019 Biedenbach, et. al. 2019; Dash, et. al. 2020; Hutahayan, 2020; AlQershi, et. al. 2020; Hussen. 2020; Huang, et. al. 2020; Mubarik, et. al. 2020) first discussed in articles by Ante Pulic in 2001, 2004 and 2008 and recognized as one of the crucial elements of the analysis by numerous researches Dzenopoljac, et.al. (2017). Majority of authors have adjusted personnel costs to added value. Within the current research, sales revenue is used as adjustment as it helps to avoid interpretation issues when the value added number is negative. 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽4 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽5𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽6𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽7𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽8 𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑆𝑆𝑆𝑆𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽9𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼1 …𝐼𝐼𝐼𝐼 + 𝑒𝑒𝑒𝑒; 𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 𝑃𝑃𝑃𝑃𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸𝐷𝐷𝐷𝐷 = 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅&𝐷𝐷𝐷𝐷 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑅𝑅𝑅𝑅𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 + 𝑝𝑝𝑝𝑝𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝑝𝑝𝑝𝑝𝑐𝑐𝑐𝑐𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀ℎ𝐶𝐶𝐶𝐶 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑇𝑇𝑇𝑇 + 𝐵𝐵𝐵𝐵𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐷𝐷𝐷𝐷𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐹𝐹𝐹𝐹𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑅𝑅𝑅𝑅𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 (2) Marketing is concerned with the task of developing and managing customer relationships. In order to standardize the proxy for the measurement of Relational Capital: 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽4 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽5𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽6𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽7𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽8 𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑆𝑆𝑆𝑆𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽9𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼1 …𝐼𝐼𝐼𝐼 + 𝑒𝑒𝑒𝑒; 𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 𝑃𝑃𝑃𝑃𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸𝐷𝐷𝐷𝐷 = 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅&𝐷𝐷𝐷𝐷 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑅𝑅𝑅𝑅𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 + 𝑝𝑝𝑝𝑝𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝑝𝑝𝑝𝑝𝑐𝑐𝑐𝑐𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀ℎ𝐶𝐶𝐶𝐶 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑇𝑇𝑇𝑇 + 𝐵𝐵𝐵𝐵𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐷𝐷𝐷𝐷𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐹𝐹𝐹𝐹𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑅𝑅𝑅𝑅𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 (3) Research and development (R&D) expenditure has been used extensively in the literature as a proxy for innovation capacity1. The efficiency of innovation is calculated the following manner: 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽4 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽5𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽6𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽7𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽8 𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑆𝑆𝑆𝑆𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽9𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼1 …𝐼𝐼𝐼𝐼 + 𝑒𝑒𝑒𝑒; 𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 𝑃𝑃𝑃𝑃𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸𝐷𝐷𝐷𝐷 = 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅&𝐷𝐷𝐷𝐷 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑅𝑅𝑅𝑅𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 + 𝑝𝑝𝑝𝑝𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝑝𝑝𝑝𝑝𝑐𝑐𝑐𝑐𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀ℎ𝐶𝐶𝐶𝐶 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑇𝑇𝑇𝑇 + 𝐵𝐵𝐵𝐵𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐷𝐷𝐷𝐷𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐹𝐹𝐹𝐹𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑅𝑅𝑅𝑅𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 (4) 1 Anifowose, M., Rashid H.M.A., Annuar H.A., Ibrahim, H. (2018). Intellectual capital efficiency and corporate book value: evidence from Nigerian economy. Journal of Intellectual Capital, 19(3), 653; 155 European Integrat ion Studies 2022/16 Intellectual Property / Intangible Assets are defined in this study as protected capital which is legally protected rights concerning ownership of specific assets such as trademark, patent, in- dustrial design and copyright (Anifowose, et. al., 2018). 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽4 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽5𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽6𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽7𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽8 𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑆𝑆𝑆𝑆𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽9𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼1 …𝐼𝐼𝐼𝐼 + 𝑒𝑒𝑒𝑒; 𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 𝑃𝑃𝑃𝑃𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸𝐷𝐷𝐷𝐷 = 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅&𝐷𝐷𝐷𝐷 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑅𝑅𝑅𝑅𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 + 𝑝𝑝𝑝𝑝𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝑝𝑝𝑝𝑝𝑐𝑐𝑐𝑐𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀ℎ𝐶𝐶𝐶𝐶 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑇𝑇𝑇𝑇 + 𝐵𝐵𝐵𝐵𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐷𝐷𝐷𝐷𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐹𝐹𝐹𝐹𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑅𝑅𝑅𝑅𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 (5) The two measurement indicators for the process capital can be used - investment in information technology and administrative expenses (Scafarto, Ricci & Scafarto, 2016): 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽4 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽5𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽6𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽7𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽8 𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑆𝑆𝑆𝑆𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽9𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼1 …𝐼𝐼𝐼𝐼 + 𝑒𝑒𝑒𝑒; 𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 𝑃𝑃𝑃𝑃𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸𝐷𝐷𝐷𝐷 = 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅&𝐷𝐷𝐷𝐷 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑅𝑅𝑅𝑅𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 + 𝑝𝑝𝑝𝑝𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝑝𝑝𝑝𝑝𝑐𝑐𝑐𝑐𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀ℎ𝐶𝐶𝐶𝐶 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑇𝑇𝑇𝑇 + 𝐵𝐵𝐵𝐵𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐷𝐷𝐷𝐷𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐹𝐹𝐹𝐹𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑅𝑅𝑅𝑅𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 (6) Social capital can be measured within the IC ecosystem in the fourth stage of the research as support to the society beyond the company. The relations can be causal. 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽4 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽5𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽6𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝛽𝛽𝛽𝛽7𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽8 𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑆𝑆𝑆𝑆𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝛽𝛽𝛽𝛽9𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼1 …𝐼𝐼𝐼𝐼 + 𝑒𝑒𝑒𝑒; 𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 𝑃𝑃𝑃𝑃𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝐸𝐸𝐸𝐸𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸𝐷𝐷𝐷𝐷 = 𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑅𝑅𝑅𝑅&𝐷𝐷𝐷𝐷 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀 𝑅𝑅𝑅𝑅𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 + 𝑝𝑝𝑝𝑝𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝑐𝑐𝑐𝑐𝐶𝐶𝐶𝐶𝑝𝑝𝑝𝑝𝑐𝑐𝑐𝑐𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀ℎ𝐶𝐶𝐶𝐶 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇𝑅𝑅𝑅𝑅𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑇𝑇𝑇𝑇𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃 + 𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝑇𝑇𝑇𝑇 + 𝐵𝐵𝐵𝐵𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐶𝐶𝐶𝐶𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 = 𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐷𝐷𝐷𝐷𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝐶𝐶𝐶𝐶𝑀𝑀𝑀𝑀𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑇𝑇𝑇𝑇 𝐹𝐹𝐹𝐹𝑀𝑀𝑀𝑀𝑃𝑃𝑃𝑃𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑐𝑐𝑐𝑐𝑀𝑀𝑀𝑀𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃 𝑆𝑆𝑆𝑆𝑅𝑅𝑅𝑅𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝐶𝐶𝐶𝐶𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶 𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 (7) The measurement of control variables are chosen for the current research: 1 Lev, t is the natural logarithm of the leverage of the current period, given by the ratio of book value of total debt of the current period to total assets of the current period; 2 SIZEi, t is the size of the current period, given by the natural logarithm of total assets of the current period; 3 AGEi, t is firm’s age of the current period, given by the natural logarithm of the number of years of existence of the firm of the current period Sardo & Serrasqueiro (2017). Moderating variables within the current research are: 1 Nasdaq list – main or secondary; 2 Country – Latvia, Lithuania, Estonia; 3 NACE – fifteen industries. Historically the performance financial ratios can be divided into market value ratios, financial leverage, liquidity and solvency, profitability and asset efficiency or turnover ratios. A growing number of the new diverse ratios like value-added ratios (reaching 300), for example, has creat- ed the critical mass of the data to analyze and need to establish the layers of analysis and limit it to the bearable scale. The initiative undertaken by a number of researchers is to shift the financial performance analysis paradigm from the object of the analysis to the subject or stakeholder interests. One of the solutions offered by Sorokin is to combine the matrix integrating both classi- fication approaches by homogeneity (five groups of financial coefficients) and stakeholders (five- plus groups of the stakeholders) and types of the decisions, opening the matrix for the additional ratios if needed in each particular case. There is a space for maneuver, flexibility, and tailored made systems in each particular research or business case. Analyzing companies’ fact sheets as well as company yearly reports one can see the ratios companies, Nasdaq, and Morning star has selected to analyze. Comparing ratios in the matrix and facts sheets and financial report we can obtain the following ratios (see the Table 2.). The main aim of the current research is to limit the analysis to strategic, income, and investment decisions. Elaborating on the classification by Sorokin the framework can be enriched by the European Integrat ion Studies2022/16 156 Business performance Composite ratio and sales Revenue growth rate. The ratios of Strategic and Investment decisions groups selected for the analysis are: Elaborating on the approach the model for the analysis is developed. By doing so the analysis of the ratios is simplified and systemized, the stakeholders can see the overlapping areas in deci- sion making and the area of responsibility is clearly defined. Decision / Stakeholder Owner Management Borrower (creditors) Strategic ROE, P/E, VA, GR, RBS Operational NA Investment ROA, ROI Financial NA NA Table 2 Modified matrix of Selected Nasdaq Baltic financial ratios based on approach by M. Sorokin Source: construction by Nellija Titova based on Sorokin matrix and Nasdaq Baltic data according methodology by Sorokin (Сорокин, 2006). Name Description Formula ROA Return on assets EBIT / Net Operating Assets ROE Return on Equity Net Profit / Equity ROI Return on Investments Net Profit / Cost of Investments P/E Price/Earnings Share Price/ Earnings per share GR Growth Rate Sales t/ Sales t-1 RBS Rate of Business Success R1+R2+R3+R4 VA Value Added See section 1.3 Table 3 Business performance ratios selected for the impact analysis Source: Nellija Titova construction Data and research period: » Both dependent and independent variables are based on Nasdaq Baltic Data for the period 2013-2019 for Estonia, Latvia and Lithuania from both primary and secondary lists of com- panies / issuers; » All companies issuers are included in the data base with no exclusions; » Data is reliable, valid and legitimate as it is prepared according to EU regulations – yearly financial statements and supplements; » It is required by law to publish the data so the source is Nasdaq Baltic webpage, where the in- formation is stored in PDF format documents and was manually processed to the data base; » Financial data come from Morningstar.com analysis; » Problem of missing data – unbalanced panel data, pdf only, different currencies, different approaches in Notes. The data was collected primarily from the balance sheet, profit and loss statement and notes, where major cost positions where explained, of the Nasdaq Baltics (Latvia, Lithuania, and Esto- nia) stock issuers, nighty two companies, for the period 2013-2019. Panel data, combination of time series and cross section, is structure of the research database. 157 European Integrat ion Studies 2022/16 As companies do not report all the data and have presented the Notes to the financial reports in different formats or scale of reporting, the data panel is unbalanced. Panel data analysis allows identifying the same cross-sectional relationship at different points of time and accounts for individual heterogeneity. In this case fixed effect panel data model will be estimated to treat the unobserved individual heterogeneity for each company to be correlated with the explanatory independent variables. Due to the lack of data on Innovation Capital efficiency and Social Capital efficiency, they are not used in the analysis. Due the small number of companies represented in each industry at this stage dummies for the industry are not used. ResultsDue to missing values and outliers, the data cleaning process demanded consideration to avoid significant effect on the final statistical results. Consistency checks served to identify the data, which are out of range, logically inconsistent or have extreme values. The missing responses were treated carefully to minimize their adverse effects by assigning a suitable value (neutral or imputed) or discarding them methodically (case wise or pair wise deletion). For each of the vari- ables first and second quartiles were calculated, obtaining in quartile range, upper, lower bounds, and outliers identified. Outliers were further excluded from the analysis. Return on AssetsHypothesis 1. Intellectual Capital has positive significant impact on ROA Hypothesis 2. Intellectual Capital has positive significant impact on ROA with a time lag Return on assets is one of the main strategic performance indicators of the company. Return on total assets provides the foundation necessary for a company to deliver a good return on equity. A company without a good ROTA finds it almost impossible to generate a satisfactory ROE. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙 = 𝐸𝐸𝐸𝐸𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (9) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (10) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (11) Return on Equity is one of the main strategic performance indicators of the company. According to Welsh (2003), this ratio is arguably the most important in business finance. It measures the absolute return delivered to the shareholders. A good figure brings success to the business – it results in a high share price and makes it easy to attract new funds. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (12) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (13.) 𝑃𝑃𝑃𝑃𝑒𝑒𝑒𝑒𝑡𝑡𝑡𝑡𝐷𝐷𝐷𝐷𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 (𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻) = 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑁𝑁𝑁𝑁 + 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑁𝑁𝑁𝑁𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁 ∗ (1−𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁 𝑓𝑓𝑓𝑓𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼) 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑁𝑁𝑁𝑁𝑙𝑙𝑙𝑙𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (15) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (16.) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼_𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒_𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (17) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑤𝑤𝑤𝑤𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽3𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶1𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽10𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽11𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (181) (8) EBIT is the amount remaining when the total operating cost is deducted from total revenue, but before either interest or tax has been paid. The total operating cost includes direct factory cost, plus administration, selling, and distribution overheads. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙 = 𝐸𝐸𝐸𝐸𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (9) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (10) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (11) Return on Equity is one of the main strategic performance indicators of the company. According to Welsh (2003), this ratio is arguably the most important in business finance. It measures the absolute return delivered to the shareholders. A good figure brings success to the business – it results in a high share price and makes it easy to attract new funds. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (12) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (13.) 𝑃𝑃𝑃𝑃𝑒𝑒𝑒𝑒𝑡𝑡𝑡𝑡𝐷𝐷𝐷𝐷𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 (𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻) = 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑁𝑁𝑁𝑁 + 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑁𝑁𝑁𝑁𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁 ∗ (1−𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁 𝑓𝑓𝑓𝑓𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼) 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑁𝑁𝑁𝑁𝑙𝑙𝑙𝑙𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (15) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (16.) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼_𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒_𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (17) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑤𝑤𝑤𝑤𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽3𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶1𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽10𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽11𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (181) (9) In the case of the extended model for ROA significant and positive change is identified in size and leverage level of the company as control variables as well as Relational capital of previous period meaning expenditures related to the sales and marketing. Companies in the first list complying with special requirements for the financial status demonstrate a positive correlation with ROA as could be expected. Adding the Human Capital component, we still see leverage as a defining fac- tor and, usefully for the further analysis, Human Capital proxies adjusted for the assets in period t and t-1 meaning expenditures on personnel including bonuses, training, and insurance have a significant and positive impact on Return on Assets. Following with Process Capital element we do not see the impact. The only variable having a relatively low impact is expenditures on IT systems and Board salaries adjusted for value-added in period t-1. What matters is the age of the company, size, and leverage level. Protected Capital does not explain the return on assets. Nevertheless, adjusting expenditure on intangible assets in the current period adjusted for the sales revenue and protected capital adjusted for the assets in the previous period for the first list of the companies we can diagnose the positive impact. European Integrat ion Studies2022/16 158 Summarizing panel data analysis of IC impact on ROA the following equation might be created with variables filtered out from the individual variables’ analysis: 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙 = 𝐸𝐸𝐸𝐸𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (9) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (10) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (11) Return on Equity is one of the main strategic performance indicators of the company. According to Welsh (2003), this ratio is arguably the most important in business finance. It measures the absolute return delivered to the shareholders. A good figure brings success to the business – it results in a high share price and makes it easy to attract new funds. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (12) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (13.) 𝑃𝑃𝑃𝑃𝑒𝑒𝑒𝑒𝑡𝑡𝑡𝑡𝐷𝐷𝐷𝐷𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 (𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻) = 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑁𝑁𝑁𝑁 + 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑁𝑁𝑁𝑁𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁 ∗ (1−𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁 𝑓𝑓𝑓𝑓𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼) 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑁𝑁𝑁𝑁𝑙𝑙𝑙𝑙𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (15) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (16.) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼_𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒_𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (17) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑤𝑤𝑤𝑤𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽3𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶1𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽10𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽11𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (181) (10) Parameter B Standard Error t Sig. 90% Confidence Interval Observed Powera Lower Bound Upper Bound Intercept -32.007 6.275 -5.101 0.000 -42.382 -21.631 1.000 NACE 2.793 1.497 1.866 0.064 0.318 5.269 0.585 List 5.054 1.800 2.808 0.006 2.078 8.031 0.875 Size_ln 2.304 0.544 4.233 0.000 1.404 3.204 0.995 Lev_ln -1.593 0.437 -3.641 0.000 -2.316 -0.869 0.976 RCE_CA_1 46.930 15.092 3.110 0.002 21.977 71.883 0.927 PCE_CVA_1 2.011 1.005 2.001 0.047 -3.674 0.349 0.636 [Country=1] 2.825 1.509 1.872 0.063 0.330 5.320 0.587 [Country=2] 2.561 2.169 1.181 0.239 -1.025 6.148 0.322 [Country=3] 0 . . . . . . Table 4 Intellectual capital components’ impact on Return on Assets parameter estimates 2012-2019 Source: Nellija Titova calculations based on Nasdaq Baltic Data Narrowing down the number of variables we run extended regression including all variables identified at previous levels and include them in one regression. The majority of the variables are still significant allowing for the extraction of the major IC factors behind the ROA. The regression (significance 0.019) shows significant results (see the table 4.1 “Intellectual capital components’ impact on Return on Assets, parameter estimates, 2012-2019, Nasdaq Baltic”) with an adjusted R2 of 33%. Main conclusions of impact analysis that control variables as the Nasdaq Baltic list, size, age, and leverage are defining the ROA. On the intellectual capital side expenditures on relational cap- ital (expenditures on sales and marketing) and process capital (expenditures on IT systems and Board salaries) in the previous period are behind the increasing return on assets in the current period. Choosing between proxies – IC expenditures adjusted for Value Added, Sales Revenue, and Assets, the analysis helps to extract two – adjusted for Value Added and Assets. The latter can be explained by partial correlation as the sum of assets is used in both ROA and proxy for- mulas. The explanation power of this regression is 33% that means that there is another non-IC factor behind the success. Still, this is a clear indication of the decision to spend on marketing, sales, IT systems, and strong motivation system for the board in the previous period (t-1) com- bined with listing in the first Nasdaq Baltic list, being a large enterprise with control for the debt of the company brings a meaningful increase in return on assets in the current period. Regression ROE Hypothesis 4.3. Intellectual Capital has positive significant impact on ROE Hypothesis 4.4. Intellectual Capital has positive significant impact on ROE with a time lag 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙 = 𝐸𝐸𝐸𝐸𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (9) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (10) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (11) Return on Equity is one of the main strategic performance indicators of the company. According to Welsh (2003), this ratio is arguably the most important in business finance. It measures the absolute return delivered to the shareholders. A good figure brings success to the business – it results in a high share price and makes it easy to attract new funds. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (12) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (13.) 𝑃𝑃𝑃𝑃𝑒𝑒𝑒𝑒𝑡𝑡𝑡𝑡𝐷𝐷𝐷𝐷𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 (𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻) = 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑁𝑁𝑁𝑁 + 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑁𝑁𝑁𝑁𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁 ∗ (1−𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁 𝑓𝑓𝑓𝑓𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼) 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑁𝑁𝑁𝑁𝑙𝑙𝑙𝑙𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (15) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (16.) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼_𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒_𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (17) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑤𝑤𝑤𝑤𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽3𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶1𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽10𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽11𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (181) (11) 159 European Integrat ion Studies 2022/16 Return on Equity is one of the main strategic performance indicators of the company. According to Welsh (2003), this ratio is arguably the most important in business finance. It measures the absolute return delivered to the shareholders. A good figure brings success to the business – it results in a high share price and makes it easy to attract new funds. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙 = 𝐸𝐸𝐸𝐸𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (9) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (10) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (11) Return on Equity is one of the main strategic performance indicators of the company. According to Welsh (2003), this ratio is arguably the most important in business finance. It measures the absolute return delivered to the shareholders. A good figure brings success to the business – it results in a high share price and makes it easy to attract new funds. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (12) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (13.) 𝑃𝑃𝑃𝑃𝑒𝑒𝑒𝑒𝑡𝑡𝑡𝑡𝐷𝐷𝐷𝐷𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 (𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻) = 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑁𝑁𝑁𝑁 + 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑁𝑁𝑁𝑁𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁 ∗ (1−𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁 𝑓𝑓𝑓𝑓𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼) 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑁𝑁𝑁𝑁𝑙𝑙𝑙𝑙𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (15) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (16.) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼_𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒_𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (17) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑤𝑤𝑤𝑤𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽3𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶1𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽10𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽11𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (181) (12) Table 5 Intellectual capital components’ impact on ROE, parameter estimates, 2012-2019, Nasdaq Baltic Source: Nellija Titova calculations based on Nasdaq Baltic Data Parameter B Standard Error t Sig. 90% Confidence Interval Observed Power Lower Bound Upper Bound Intercept -4.928 4.648 -1.060 0.291 -12.625 2.770 0.281 List 15.606 4.063 3.841 0.000 8.877 22.334 0.985 RCE_CA_1 155.972 54.015 2.888 0.005 66.529 245.414 0.890 PCE_CVA_1 8.609 1.941 4.435 0.000 -11.823 5.395 0.997 PrCE 48.539 24.308 1.997 0.048 8.288 88.791 0.634 PrCE_1 49.914 24.590 2.030 0.044 -90.633 9.196 0.646 [Country=1] 5.410 3.940 1.373 .172 -1.114 11.935 0.392 [Country=2] 2.282 4.729 .482 .630 -5.549 10.112 0.139 [Country=3] 0 . . . . . . Continuing with Return on Equity at an individual component level among RCE proxies RCE ad- justed for assets in period t and t-1 were selected, human capital did not contribute significantly to ROE, process capital adjusted for the value-added proved significance of IT systems and board salaries expenditures in previous period on the financial results of the current period, protected capital adjusted for the sales revenue is significant for both t and t-1 period. Control variables and moderate variables appeared to be only size and leverage ratio that matters in ROE case. Diminishing the number of variables analysing IC impact on ROE full regression included 10 var- iables and short one limited the number of variables to seven (see formula 12 including control variables (see table 5). Final model is significant at 0,011 with explanatory factor R2 = 0,4 and adjusted R2 = 0,34. The model illustrates the factors behind the increase in Return on equity in the current period. Main conclusions of impact analysis that the Nasdaq list is the only control variable that has a sig- nificant impact on ROE. It can be explained by the fact that first list companies have special re- quirements on the financial status. On the intellectual capital side expenditures on relational capital (expenditures on sales and marketing) adjusted for assets in the previous period from the ROE. Process capital (expenditures on IT systems and Board salaries) in the previous period are behind the increasing return on equity in the current period adjusted for value-added. Finally protected capital expenditures appear to be significant at 0,05 both in the current and previous period adjusted for the sales revenue which means investments/expenditures on IT systems and Board salaries pay off in the current and next period. Therefore, Nasdaq companies generous to support marketing and sales, IT systems and strong motivation system for the board in the previous period (t-1) combined with listing in the first Nasdaq list, can promote an increase in ROE in the current period. European Integrat ion Studies2022/16 160 Hypothesis 4.5. Intellectual Capital has positive significant impact on ROI Hypothesis 4.6. Intellectual Capital has positive significant impact on ROI with a time lag 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙 = 𝐸𝐸𝐸𝐸𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (9) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (10) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (11) Return on Equity is one of the main strategic performance indicators of the company. According to Welsh (2003), this ratio is arguably the most important in business finance. It measures the absolute return delivered to the shareholders. A good figure brings success to the business – it results in a high share price and makes it easy to attract new funds. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (12) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (13.) 𝑃𝑃𝑃𝑃𝑒𝑒𝑒𝑒𝑡𝑡𝑡𝑡𝐷𝐷𝐷𝐷𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 (𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻) = 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑁𝑁𝑁𝑁 + 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑁𝑁𝑁𝑁𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁 ∗ (1−𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁 𝑓𝑓𝑓𝑓𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼) 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑁𝑁𝑁𝑁𝑙𝑙𝑙𝑙𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (15) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (16.) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼_𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒_𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (17) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑤𝑤𝑤𝑤𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽3𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶1𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽10𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽11𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (181) (13) Return on Investments is one of the main strategic performance indicators of the company. A calculation used to assess a company’s efficiency at allocating the capital under its control to profitable investments (Morningstar, 2019). 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙 = 𝐸𝐸𝐸𝐸𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (9) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (10) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (11) Return on Equity is one of the main strategic performance indicators of the company. According to Welsh (2003), this ratio is arguably the most important in business finance. It measures the absolute return delivered to the shareholders. A good figure brings success to the business – it results in a high share price and makes it easy to attract new funds. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (12) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (13.) 𝑃𝑃𝑃𝑃𝑒𝑒𝑒𝑒𝑡𝑡𝑡𝑡𝐷𝐷𝐷𝐷𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 (𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻) = 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑁𝑁𝑁𝑁 + 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑁𝑁𝑁𝑁𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁 ∗ (1−𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁 𝑓𝑓𝑓𝑓𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼) 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑁𝑁𝑁𝑁𝑙𝑙𝑙𝑙𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (15) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (16.) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼_𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒_𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (17) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑤𝑤𝑤𝑤𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽3𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶1𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽10𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽11𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (181) (14) Applying the same method to the Return on Invested Capital ratio two final regression models can be analysed, i.e., full and short version of it: 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙 = 𝐸𝐸𝐸𝐸𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (9) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (10) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (11) Return on Equity is one of the main strategic performance indicators of the company. According to Welsh (2003), this ratio is arguably the most important in business finance. It measures the absolute return delivered to the shareholders. A good figure brings success to the business – it results in a high share price and makes it easy to attract new funds. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (12) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (13.) 𝑃𝑃𝑃𝑃𝑒𝑒𝑒𝑒𝑡𝑡𝑡𝑡𝐷𝐷𝐷𝐷𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 (𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻) = 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑁𝑁𝑁𝑁 + 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑁𝑁𝑁𝑁𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁 ∗ (1−𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁 𝑓𝑓𝑓𝑓𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼) 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑁𝑁𝑁𝑁𝑙𝑙𝑙𝑙𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (15) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (16.) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼_𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒_𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (17) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑤𝑤𝑤𝑤𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽3𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶1𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽10𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽11𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (181) (15) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙 = 𝐸𝐸𝐸𝐸𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (9) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (10) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (11) Return on Equity is one of the main strategic performance indicators of the company. According to Welsh (2003), this ratio is arguably the most important in business finance. It measures the absolute return delivered to the shareholders. A good figure brings success to the business – it results in a high share price and makes it easy to attract new funds. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (12) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (13.) 𝑃𝑃𝑃𝑃𝑒𝑒𝑒𝑒𝑡𝑡𝑡𝑡𝐷𝐷𝐷𝐷𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 (𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻) = 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑁𝑁𝑁𝑁 + 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑁𝑁𝑁𝑁𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁 ∗ (1−𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁 𝑓𝑓𝑓𝑓𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼) 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑁𝑁𝑁𝑁𝑙𝑙𝑙𝑙𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (15) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (16.) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼_𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒_𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (17) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑤𝑤𝑤𝑤𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽3𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶1𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽10𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽11𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (181) (16) Preselected individual variables are 5 IC variables’ proxies and all control and moderate variables and short version include the reduced number of variables selected by significance factor that are four on IC side and control and moderate variables (see table 4.3. Intellectual capital compo- nents’ impact on ROIC, parameter estimates, 2012-2019, Nasdaq Baltic). Explanatory power is relatively low for these regressions of 20% that is within significance interval in case of panel data analysis. Summarizing the analysis of IC impact on ROIC Nasdaq list and size of the company is defining ROIC on the control and moderate variables side. It can be explained by the fact that first list companies have special requirement on the financial status and the fact that big companies also are big scale investors. Regression ROI Table 6 Intellectual capital components’ impact on ROIC, parameter estimates, 2012-2019, Nasdaq Baltic Source: Nellija Titova calculations based on, Nasdaq Baltic Data Parameter B Standard Error t Sig. 90% Confidence Interval Observed Power Lower Bound Upper Bound Intercept -17.731 5.947 -2.981 0.003 -27.568 -7.893 0.907 List 3.737 1.467 2.548 0.012 1.311 6.163 0.814 Size_ln 1.576 0.499 3.158 0.002 0.750 2.401 0.933 HCE_HCA_1 9.247 2.691 3.436 0.001 4.796 13.699 0.962 PCE_CVA_1 1.862 0.757 2.459 0.015 -3.115 0.609 0.789 PrCE 22.657 9.696 2.337 0.021 6.619 38.696 0.753 [Country=1] 0.688 1.491 0.462 0.645 -1.778 3.155 0.136 [Country=2] 0.322 1.801 0.179 0.858 -2.657 3.301 0.105 [Country=3] 0 . . . . . . 161 European Integrat ion Studies 2022/16 On the intellectual capital side compared to ROA and ROE where human capital did not appear as significant for the return on invested capital personnel expenditures does matter for the next period, i.e., t-1 period expenditures influence return in the next period. Similar to ROA and ROE, process capital (expenditures on IT systems and Board salaries) in the previous period are behind the increasing return on invested capital in the current period adjusted for value-added. Finally, also similarly to ROE, ROA also for ROIC protected capital expenditures appear to be significant at 0,05 both in current and previous period adjusted for the sales revenue that means investments/ expenditures on IT systems and Board salaries pay off in the current and next period. In turn expenditures on relational capital (expenditures on sales and marketing) do not appear globally significant. Therefore, Nasdaq first lists companies generous to support personnel in terms of salaries, bonuses, insurance, training, etc. And IT systems and strong motivation system for the board in the previous period (t-1) as well as current expenditures on intangible assets, ensure a high level of Return on Invested Capital in the next period. Growth rateLimiting the number of variables to significant dependent variables the regression for the sales revenue growth is following: 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙 = 𝐸𝐸𝐸𝐸𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (9) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (10) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (11) Return on Equity is one of the main strategic performance indicators of the company. According to Welsh (2003), this ratio is arguably the most important in business finance. It measures the absolute return delivered to the shareholders. A good figure brings success to the business – it results in a high share price and makes it easy to attract new funds. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (12) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (13.) 𝑃𝑃𝑃𝑃𝑒𝑒𝑒𝑒𝑡𝑡𝑡𝑡𝐷𝐷𝐷𝐷𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 (𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻) = 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑁𝑁𝑁𝑁 + 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑁𝑁𝑁𝑁𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁 ∗ (1−𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁 𝑓𝑓𝑓𝑓𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼) 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑁𝑁𝑁𝑁𝑙𝑙𝑙𝑙𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (15) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (16.) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼_𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒_𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (17) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑤𝑤𝑤𝑤𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽3𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶1𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽10𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽11𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (181) (17) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙 = 𝐸𝐸𝐸𝐸𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵𝐵 𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (9) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (10) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (11) Return on Equity is one of the main strategic performance indicators of the company. According to Welsh (2003), this ratio is arguably the most important in business finance. It measures the absolute return delivered to the shareholders. A good figure brings success to the business – it results in a high share price and makes it easy to attract new funds. 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝑃𝑃𝑃𝑃 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (12) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽1𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽2𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽3𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽4𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽6𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝐿𝐿𝐿𝐿𝑃𝑃𝑃𝑃𝐿𝐿𝐿𝐿𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐷𝐷𝐷𝐷𝑚𝑚𝑚𝑚𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼𝐸𝐸𝐸𝐸 + 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝐿𝐿𝐿𝐿𝐸𝐸𝐸𝐸 + 𝑒𝑒𝑒𝑒 (13.) 𝑃𝑃𝑃𝑃𝑒𝑒𝑒𝑒𝑡𝑡𝑡𝑡𝐷𝐷𝐷𝐷𝑃𝑃𝑃𝑃𝐼𝐼𝐼𝐼 𝐻𝐻𝐻𝐻𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 𝐻𝐻𝐻𝐻𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙 (𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻) = 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑁𝑁𝑁𝑁 + 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝑁𝑁𝑁𝑁𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁 ∗ (1−𝐵𝐵𝐵𝐵𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑅𝑅𝑅𝑅𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑁𝑁𝑁𝑁 𝑓𝑓𝑓𝑓𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼) 𝐵𝐵𝐵𝐵𝑡𝑡𝑡𝑡𝐼𝐼𝐼𝐼𝑁𝑁𝑁𝑁𝐼𝐼𝐼𝐼𝐶𝐶𝐶𝐶 𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇𝐸𝐸𝐸𝐸 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑁𝑁𝑁𝑁𝑙𝑙𝑙𝑙𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (15) 𝑃𝑃𝑃𝑃𝑅𝑅𝑅𝑅𝐼𝐼𝐼𝐼𝐻𝐻𝐻𝐻 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐿𝐿𝐿𝐿𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝐶𝐶𝐶𝐶𝑡𝑡𝑡𝑡 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝑇𝑇𝑇𝑇1 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃1 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (16.) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼_𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙 = 𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑒𝑒𝑒𝑒𝑃𝑃𝑃𝑃𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑡𝑡𝑡𝑡 + 𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒_𝑙𝑙𝑙𝑙𝐼𝐼𝐼𝐼 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_1 + 𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃 + 𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙 + 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐷𝐷𝐷𝐷𝐼𝐼𝐼𝐼𝑡𝑡𝑡𝑡𝑃𝑃𝑃𝑃𝐷𝐷𝐷𝐷 (17) 𝐿𝐿𝐿𝐿𝐼𝐼𝐼𝐼 𝐼𝐼𝐼𝐼𝑚𝑚𝑚𝑚𝑙𝑙𝑙𝑙𝑒𝑒𝑒𝑒𝑙𝑙𝑙𝑙𝑤𝑤𝑤𝑤𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 = 𝛽𝛽𝛽𝛽0 + 𝛽𝛽𝛽𝛽3𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽5𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽7𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶1𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽8𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽10𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 + 𝛽𝛽𝛽𝛽11𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝐻𝐻𝐻𝐻𝑃𝑃𝑃𝑃_𝐻𝐻𝐻𝐻𝑙𝑙𝑙𝑙𝐶𝐶𝐶𝐶𝐶𝐶𝐶𝐶 (181) (18) Control variables: lnSIZEti Moderate variables: Country The model appears to be significant with adjusted R squared 0,831. According to the analysis (see table 4.4. “Intellectual capital components’ impact on the sales growth rate, parameter es- timates, 2012-2019, Nasdaq Baltic”) the major factor to influence sales is to spend on the per- sonnel and board salaries, IT systems and intangible assets like patents, brands, know-how, etc. Parameter B Standard Error t Sig. 90% Confidence Interval Observed Powera Lower Bound Upper Bound Intercept 2.979 0.392 7.598 0.000 2.331 3.628 1.000 Size_ln 0.736 0.031 24.056 0.000 0.685 0.786 1.000 HCE 5.896 0.502 11.741 0.000 -6.726 -5.066 1.000 HCE_HCA 3.129 0.307 10.200 0.000 2.622 3.636 1.000 PCE_1 4.320 1.065 4.055 0.000 -6.081 2.558 0.992 PCE_PCA 12.314 1.732 7.109 0.000 9.450 15.178 1.000 PrCE 0.210 0.664 1.821 0.070 -2.309 0.111 0.567 PrCE_PrCA 3.644 0.992 3.673 0.000 2.004 5.284 0.978 [Country=1] -0.165 0.101 -1.630 0.105 -0.332 0.002 0.492 [Country=2] 0.119 0.116 1.030 0.305 -0.072 0.311 0.272 [Country=3] 0 . . . . . . Table 7 Intellectual capital components’ impact on Sales, parameter estimates, 2012-2019, Nasdaq Baltic Source: Nellija Titova calculations based on Nasdaq Baltic Data European Integrat ion Studies2022/16 162 Proxy of intellectual capital adjusted for assets provides higher quality data compared with ad- justment with sales revenue and value-added. Process capital (IT and board salaries) is the only factor of period t-1 that has an impact on sales revenue in period t. The efficient management system is key success factor behind volumes, pricing policy, and sales increase. Control vari- ables such as leverage and size prove to have significant impact on the company growth rate. Discussion Government agencies in cooperation with industry associations / chambers of commerce and Nasdaq Baltic in all three Baltic States may re-evaluate reporting recommendations on intellec- tual capital, including intangible assets, and its components, extending beyond intangible assets to include social capital, human capital, etc., clearly defining structure of components and taking into account the experience of other countries working on mandatory and voluntary reporting of ICs. In addition, impact analysis at the national and micro levels of companies, as well as indus- try-level research, can contribute to defining strategies for economic development and sustain- ability. Companies must publish their annual accounts on the Nasdaq website. As companies use different individual approaches to the notes to the financial statements when reporting to Nasdaq Baltic, Nasdaq Baltic can more clearly define the requirements for the notes to the finan- cial statements submitted by companies, harmonize the description structure and specify the required data and data formats. Conclusions » Main conclusions of IC impact analysis on Return on Assets are that control variables such as the Nasdaq list, size, age, and leverage are defining the ROA. On the intellectual capital side expenditures on relational capital (expenditures on sales and marketing) and process capital (expenditures on IT systems and Board salaries) in the previous period are behind the increasing return on assets in the current period. Choosing between proxies – IC expenditures adjusted for Value Added, Sales Revenue, and Assets, the analysis helps to extract the two: adjusted for Value Added and for Assets. The latter can be explained away as a technical fluke of partial correlation since the sum of assets is used in both ROA and proxy formulas. The explanation power of this regression is 33%, which means that there is another non-IC factor behind the success. Still, this is a clear indication in favour of spending on marketing, sales, IT systems, and strong motivation system for the board in the previous period (t-1) combined with listing in the first Nasdaq list, being a large enterprise with control for the debt of the company bringing meaningful increase in return on assets in the current period. » Main conclusions of IC impact analysis on Return on Equity are that the Nasdaq list is the only control variable that has a significant impact on ROE. It can be explained by the fact that first list companies have special requirements on the financial status. Process Capital (ex- penditures on IT systems and Board salaries) in the previous period are behind the increas- ing return on equity in the current period adjusted for value-added. Finally Protected Capital expenditures appear to be significant at 0,05 both in the current and previous period adjusted for the sales revenue which means investments / expenditures on intangible resources pay off in the current and next period. Therefore, Nasdaq companies generously spending on marketing and sales, IT systems and strong motivation system for the board in the previous period (t-1) and protected capital combined with listing in the first Nasdaq list, can expect an increase in ROE in the current period. » ROI compared to ROA and ROE, where human capital did not appear as significant, for the return on invested capital personnel expenditures does matter for the next period, i.e., t-1 period expenditures influence return in the period t. Similar to ROA and ROE, process cap- ital (expenditures on IT systems and Board salaries) in the previous period are behind the 163 European Integrat ion Studies 2022/16 increasing return on invested capital in the current period adjusted for value-added. Nasdaq first lists companies generous to support personnel in terms of salaries, bonuses, insurance, training, etc. And IT systems and strong motivation system for the board in the previous period as well as current expenditures on intangible assets, ensure a high level of Return on Invested Capital in the next period. » Research proves that for the companies registered in Estonia, Latvia and Lithuania, issuers of the Nasdaq Baltic Stock Exchange, growth rate is significantly influenced by the funds spent on employees as salary, insurance and other personnel costs as well as compensation to Board Members and costs of IT services. 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NELLIJA TITOVA Mg. oec, candidate for PhD RISEBA University of Applied Sciences, Vice Rector for Development Fields of interests Analysis of development of intellectual capital in companies in the Baltic countries listed in the Baltic Stock Exchange, application of different statistical models for analysis Address Meža iela 3, Latvia, nellija.titova@gmail.com BIRUTA SLOKA Prof. dr. oec. University of Latvia Fields of interests Application of different research methods for quan- titative analysis of business development Address Aspazijas bulv. 5, Riga, LV-1050, Latvia, + 371 29244966 Sloka@lu.lv