Firm-specific and macroeconomic factors influencing the profitability: evidence from Russian wine industry

Abstract

Purpose: objective: quantitative analysis of risk factors influencing the profitability of wine industry in Russian Federation. Discussion: despite the economic downturn, wine-making firms of the Russian Federation can make a significant contribution to the formation of conditions for ensuring food security and effective import substitution, including in the conditions of economic sanctions. Wine industry is able to act effectively even in the negative conditions of increasing excise taxes. This paper attempts to quantify the impact of risk factors common to wine industry organizations of the Russian Federation influencing firms’ performance. As part of the common risk factors we considered excise, currency, interest rate and price (at an average retail price) risks. The level of diversification is also considered among the factors influencing firms’ profitability. Results: this paper found that exposure to risk factors varies significantly depending on the firm size. On average, big firms demonstrate higher performance indicators, but they also have a greater exposure to interest rate risk, which has an extremely negative im-pact especially for firms with high debt-to-equity ratios.