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Finance
DuPon analysis among Eu opean
den is y companies o measu e he impac
o he COVID-19 pandemic
Tomas He yan1, Ka in Gajdo a2
1 Silesian Uni e si y in Opa a, School o Business Adminis a ion in Ka ina, Depa men o Finance and Accoun ing,
Czechia, ORCID: 0000-0003-2027-7149, [email p o ec ed];
2 Silesian Uni e si y in Opa a, School o Business Adminis a ion in Ka ina, Depa men o Economics and Public
Adminis a ion, Czechia, ORCID: 0000-0002-7686-2729, [email p o ec ed].
Abs ac : Al hough heal h economics belongs o he highly espec ed economic disciplines
wi hin he esea ch li e a u e, he e is a conside able gap ela ed o he in es iga ion o den is y
in pa icula , e en a e he global pandemic o COVID-19 disease. Fundamen ally, he DuPon
amewo k is a well-known complex analysis o e alua e companies om he poin o iew o inancial
pe o mance. The in es iga ion o he e u n on equi y as a ela ion be ween he e u n on asse s
and he equi y mul iplie , simply called he le e age e ec , is p esen ed in his pape . The e o e, his
s udy aims o es ima e he e ec o le e age and i s changes due o he COVID-19 pandemic among
den is y companies in selec ed Eu opean coun ies wi h di e en heal hca e insu ance sys ems.
This compa a i e in es iga ion ocused on he gene alised me hod o momen s wi h dynamic panel
da a om O bis, he Bu eau an Dijk inancial da abase o 1,128 den is y companies in nine
Eu opean coun ies. Me hodologically, conce ning hose pos -es ima ion echniques o e alua e
o e - and unde es ima ion o he models. I has been di e en ia ing be ween companies wi h a high
o low owne ship concen a ion s uc u e. The esul s ha e shown di e ences in he le e age e ec
du ing he pandemic, assuming ha companies wi h a majo owne inc eased hei equi y, while
he deb le e age inc eased among hose companies wi h dispe sed owne ship and ice e sa.
I economic heo y s a es ha deb inancing is mo e e ec i e o a company han using in e nal
sou ces, i is appa en ly di e en in he case o den is y du ing he pandemic. Howe e , dispe sed
owne ship is mo e o en ela ed o den is y, acco ding o me ge s in his pa icula business indus y.
Keywo ds: Financial pe o mance, deb le e age, heal h economics, heal hca e sys ems,
concen a ion o owne ship s uc u e.
JEL Classi ica ion: G32, I11, M21.
APA S yle Ci a ion: He yan, T., & Gajdo a, K. (2024). DuPon analysis among Eu opean
den is y companies o measu e he impac o he COVID-19 pandemic. E&M Economics and
Managemen , 27(1), 161–174. h ps://doi.o g/10.15240/ ul/001/2024-1-010
In oduc ion
DuPon analysis is one o he oldes ame-
wo ks o undamen ally e alua ing a company.
Howe e , no one has e e used ha , e en pa -
ially, o es ima e he impac o he COVID-19
pandemic on company pe o mance. Al hough
Chang e al. (2014) used he DuPon amewo k
wi hin he heal h economics al eady. The pan-
demic is gene ally conside ed he main cause
o economic down u n among many indus ies
in 2020 and 2021, and den is y is no an excep-
ion (Pa el, 2020). The ques ion also is whe he
he heal hca e sys em i sel , ei he Be e idge
o Bisma ck model in es iga ed h oughou
162 2024, olume 27, issue 1, pp. 161–174, DOI: 10.15240/ ul/001/2024-1-010
Finance
he li e a u e (Deppe & O esko ic, 1996; Lamei e
e al., 1999; Ma mo & Okma, 1997; Wend ,
2009; Wids öm & Ea on, 2004), could ha e
somehow a ec ed he si ua ion among hose
den is y companies du ing he pandemic.
Based on he li e a u e in he nex sec ion, h ee
di e en esea ch ques ions mo i a e his s udy:
i) Since e e y human being li ing in a de eloped
economy is somehow ela ed o den is y as
a pa ien , did he COVID-19 changes caused by
he pandemic a y ac oss coun ies wi h a di -
e en heal h ca e sys em? (i.e., Be e idge s.
Bisma ck); ii) E en hough he DuPon ame-
wo k is a c ucial pa o he undamen al analy-
sis, could i be help ul o es ima e he impac o
he pandemic on den is y?; and iii) Is he end
o me ge s ob ious among den is y companies
e en du ing he a ec ed pe iod?
Focused on he Dupon analysis, his pape
aims o es ima e he le e age e ec and i s
changes due o he COVID-19 pandemic among
den is y companies in selec ed Eu opean coun-
ies ha ing ei he he Be e idge model (Na ional
Heal h Se ice Sys em) o he Bisma ck model
(Compulso y Uni e sal Heal h Insu ance Sys-
em). Fo he empi ical pa o his pape , DuPon
analysis, essen ially e alua ing a b eakdown
o p o i abili y and commonly e en wi hin heal h
economics (Chang e al., 2014; Tu ne e al.,
2015), has been deployed, acco ding o Soliman
(2008). The e o e, using his pa icula ech-
nique, indi idual in luences ha a ec he inal
alue o p o i abili y a ios ha e been in es i-
ga ed (Doo asamy, 2016; Fai ield e al., 1996,
2009; Nissim & Penman, 2001). Fu he mo e,
an in es iga ion o den is y companies wi h
a high concen a ion o owne ship has a majo
owne compa ed o hose wi h a low concen a-
ion and dispe sed owne ship is ca ied ou .
The con ibu ion o his s udy is also me hod-
ological, es ing up- o-da e pos -es ima ion
echniques while using he sys em-gene alised
me hod o momen s wi h longi udinal da a.
This pape is s uc u ed as ollows.
As men ioned abo e, Sec ion 1 b ie ly e iews
he li e a u e ela ed o heal h economics.
The me hodology and da a a e desc ibed in
Sec ion 2. A discussion o GMM es ima es is
made in Sec ion 3 o his pape , igh be o e
i s conclusion.
1. Theo e ical backg ound
I is impo an o he economies o indi idual
coun ies ha people can wo k and be ac i e
in he labou ma ke . To be able o be, hey
mus be heal hy. The e o e, i is necessa y
o be awa e o his a he highes le els o in-
di idual economies. O al heal h is also ela ed
o he issue o heal h. O al heal h, along wi h
g owing awa eness o he impac ha limi ed
den al co e age has on o al heal h and o e all
heal h and well-being, has ecei ed inc eased
a en ion in ecen yea s (Winkelmann e al.,
2022). The e o e, i is necessa y o pay consid-
e able a en ion o he a ea o o al heal hca e
p o ide s and o suppo den is y and ela ed
ields. The e o e, a en ion should be paid bo h
o den is s bu also o a ious ields o p o id-
e s and p oduce s o se ices in he ield o o al
heal h ca e. Acco ding o Pe es e al. (2019),
he pe sonal consequences o ch onic un-
ea ed o al diseases a e o en se e e and can
include un elen ing pain, educed quali y o li e,
los school days, dis up ion o amily li e, and
educed wo k p oduc i i y. The cos o ea -
ing o al diseases ep esen s a la ge economic
bu den on amilies and heal hca e sys ems
(Bawaska & Bawaska , 2020). O al diseases
a e undoub edly a global public heal h p oblem,
wi h pa icula conce n o e hei inc easing
p e alence in many low- and middle-income
coun ies linked o wide social, economic, and
comme cial changes (Pe es e al., 2020).
I is also impo an o moni o ce ain socio-
economic inequali ies in he heal h o he popu-
la ion (Do e al., 2010). Inequali y in o al heal h
is expec ed due o he g owing socioeconomic
inequali y o people, and his has a di ec impac
on he unc ioning o den al businesses. In coun-
ies whe e socioeconomic di e ences a e mo e
p onounced, inequali y in he a ea o o al heal h
is also mo e p onounced (Do e al., 2010; Elani
e al., 2012; Ga cia & Tabak, 2011; Hosseinpoo
e al., 2012). An in e es ing app oach can be
obse ed in he s udy o Pinilla and González
(2009), which aces he ela ionships be ween
den al heal h and he use o den al ca e wi h
socioeconomic ac o s, human esou ces, and
he inancing and o ganisa ion o den al ca e
sys ems in Eu opean coun ies. Howe e , Pi-
nilla and González (2009) ound no e idence
ha be e access (a policy aimed a imp o -
ing access o o al heal h se ices) o den is s
imp o ed den al heal h in 12-yea -old child en.
The main pa ame e s ha in luence o al
heal h and i s de elopmen a e income and
le el o educa ion wi hin coun ies. A highe
numbe o den is s and a ela i ely young adul
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2024, olume 27, issue 1, pp. 161–174, DOI: 10.15240/ ul/001/2024-1-010
Finance
popula ion ha e a posi i e e ec on he use
o den al se ices.
The impo ance o p o iding den al medical
ca e is clea ly de ined. Fo his, i is necessa y
o s a e ha e e y hing is ela ed o inance.
And he ield o den is y is e y speci ic om
he poin o iew o inancing. Di e en ap-
p oaches o he p o ision o publicly a ailable
den al ca e o elemen s he eo a e adop ed
(Wids öm & Ea on, 2004). In gene al, i can be
said ha he expendi u e on den al ca e is i-
nanced om se e al sou ces, i.e., om public
sou ces and di ec paymen s om households
(Baili & Beazoglou, 2008). Public esou ces
a e ela ed o he heal h sys ems es ablished
in a gi en coun y. In Eu ope, he e a e wo
ypes o heal hca e sys ems used. They a e
he Be e idge model and he Bisma ck model.
The Be e idge model is buil on he p inciple
o heal h ca e paid o h ough edis ibu i e
p ocesses in he economy and hus om axes
(Lamei e e al., 1999; Wend , 2009). The Bis-
ma ck model is based on uni e sal heal h
insu ance and heal h ca e is co e ed by public
heal h insu ance, which is manda o y (Deppe
& O esko ic, 1996; Ma mo & Okma, 1997;
Wend , 2009). These wo models a e he basis
o heal hca e in Eu opean coun ies. So, i ol-
lows ha medical den al ca e in Eu opean
coun ies is pa ly paid o ei he om collec ed
axes o h ough insu ance companies. Bu i
is s ill ue ha in almos all coun ies, den al
ca e is inanced o a g ea e ex en by p i a e
pa ien paymen s han in o he sec o s o heal h
ca e (Wids öm & Ea on, 2004).
Funding in he ield o den al ca e is highly
deba able, wi h cons an ly changing a i udes
in di e en coun ies, which can also a ec
he den al businesses hemsel es. In mos
coun ies, den al ca e is only pa ially co e ed
by public heal h insu ance, which can also ha e
a ce ain impac on he gene al o al heal h
o esiden s and households. On he nega-
i e impac o insu icien unding om public
heal h insu ance unding (Ahmadi e al., 2021).
A s udy has been ca ied ou ha sugges s ha
inancing heal h ca e h ough households’ di ec
inances esul s in “ca as ophic heal h expendi-
u e” and impo e ishmen o he popula ion and
hei heal h in many coun ies. Liu e al. (2019)
explain ha , in gene al, ca as ophic heal h
expendi u es ep esen ou -o -pocke paymen s
ha exceed a speci ied h eshold o household
income o household abili y o pay. The indings
o his s udy (Ahmadi e al., 2021) s a ed ha
den al se ices a e he basis o ca as ophic
heal h expendi u es, and hese se ices mus
be co e ed o a g ea e ex en by basic heal h
insu ance o om o he public sou ces.
Ano he a ea ha is g adually coming
o he o e and is beginning o a ec he inancial
s abili y o den al businesses is he p essu e
on he ecological sus ainabili y o den al p ac-
ice (Duane e al., 2019). The e o e, he a ea
o sus ainable den is y is gaining impo ance.
Duane e al. (2020) men ion he global commi -
men o sus ainabili y, and he ac emains ha
he demands o a sus ainable wo ld a e g ow-
ing. Wi hin den is y, i is possible o moni o
he possibili ies o imp o ing he sus ainabili y o
he en i onmen in se e al a eas. The bigges
bu den is a elling o he den al o ice, which
is o en ou side he pa ien ’s egion, and his e-
sul s in a u he inc ease in ca bon emissions,
which also con ibu es o damage o human
heal h. O he a eas a e ma e ials and de ices
o den al p ac ice. La ge den al o ganisa ions
can in luence hei supplie s by choosing en i-
onmen ally iendly p oduc s om sus ainable
companies. Howe e , his is ano he a ea ha
can place a g ea e inancial bu den on den al
companies. Cu en ly, den is y is also eco e -
ing om he e ec s o COVID-19. Pandemic
and indi idual pandemic measu es ha e g ea ly
a ec ed den al businesses (Pa el, 2020).
The den al p o ession is g adually changing
in all di ec ions (Samson & Schwa z, 2019).
His o ically, den is s we e la gely owne s
o hei businesses. Ano he op ion was o join
an olde den is wi h a ision o buying he o ice
in he u u e. The p oblem was a lack o knowl-
edge o how o handle he managemen o one’s
business. The e was a lack o basic knowledge
in he ield o business economics. O e ime,
a new end eme ged when la ge g oups
o businesses we e ounded o which den is s
belong. I is easie o hese den is s o ake o e
he concep o managing and managing hei
business. Le in (2003) men ions ha den is s
o en s uggle wi h dealing wi h he business
side o hei p ac ices. Wi h a be e unde -
s anding o he business aspec s, i is possible
o edi ec ene gy and c ea e a success ul p ac-
ice while pe o ming excellen den is y.
The den is s’ app oach o hei p o i s,
which hey achie e by p o iding ca e and sub-
sequen paymen om bo h sou ces, is also
ela ed o he inancing and expansion o
164 2024, olume 27, issue 1, pp. 161–174, DOI: 10.15240/ ul/001/2024-1-010
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he ca e hey p o ide o he imp o emen o
he quali y o ca e. The goal o e e y en ep e-
neu is o make a p o i and i is no di e en
o p i a e den al cen e s. I is hen impo an
o conside how o deal wi h he p o i achie ed.
Demi bag e al. (2015) claim ha he ein es -
men o p o i s back in o he business is he key
o success. Rein es men is desc ibed by Cull
and Xu (2005) as he pe cen age o p o i in-
es ed back in o he company. McCa hy e al.
(1993) s a e ha i is a decision o expand
an exis ing business. Va iables ha , acco ding
o Demi bag e al. (2015), a e ele an o he ex-
ension o a i m’s li espan include ac o s o
which ein es men may be key, and hese
a e a scale o ope a ion (Be co i z & Mi chell,
2007), esou ce u ilisa ion (Be co i z & Mi chell,
2007; B adley e al., 2011) and s a egy g ow h
(Ma a & Po ugal, 2002).
Financial managemen and ein es men
decisions a e pa icula ly speci ic i he com-
pany has a di e en owne and manage (Coles
e al., 2001). The OLS esul s sugges ha
owne ship is signi ican o i m pe o mance,
bu when endogenei y is aken in o accoun ,
owne ship is no s a is ically dependen on pe -
o mance measu es (Welch, 2003). Be le and
Means (1932) we e one o he i s o deal wi h
he ela ionship be ween a i m’s owne ship
s uc u e and i s pe o mance. He a gues ha
as owne ship di usion inc eases, sha eholde s
become powe less o con ol p o essional man-
age s. He u he a gues ha since he in e es s
o managemen and sha eholde s a e gene ally
no aligned, co po a e esou ces a e no used
e icien ly in maximising co po a e p o i s.
The size o he company can also be deci-
si e in he decision o ein es pa o he p o i
back in o he business. Small and medium-sized
en e p ises a e likely less in e es ed in ein es -
ing p o i s in hei business. As Wellalage and
Reddy (2020) say, he ein es men o p o i s
back in o he business is a ec ed by he p es-
ence o weak ules and egula ions, a weak o -
ganisa ional and ins i u ional en i onmen , and
a highly unce ain business en i onmen . These
aspec s also make SME owne s eluc an o e-
in es p o i s in o hei businesses. Fu he mo e,
he e a e di e en app oaches o using p o i o
you business. Caselli and Neg i (2021) p esen
he pecking o de heo y, which s a es ha com-
panies p io i ise hei sou ces o inancing and
conside equi y inancing as a las eso . This
heo y s a es ha businesses ollow a hie a chy
o unding sou ces. Fi s , in e nal unds a e
used, and when hey a e used, he loan op ion
is used. Only when i is no possible o ake an-
o he loan, he equi y is used. Be ge and Udell
(1998) say ha he hie a chy o inancing used
depends on he size o he i m and he le el
o de elopmen because, o each s age
o g ow h, he e is a ce ain le el o in o ma ion
asymme y and inancing needs. This is also
known as he “ inancial g ow h cycle.”
Mos den is s enjoy he clinical aspec s
o he den al p ac ice bu o en ind manag-
ing business sys ems and s a challenging.
I is unde s andable. Mos den is s lack busi-
ness managemen aining. The p oblem is ha
den is s ain o se e al yea s in he p ac ice
o den is y and hen a e h own in o he busi-
ness en i onmen wi hou any speci ic business
aining (Le in, 2003). Den is s who un hei
p ac ice mus also conside how o app oach
ea nings managemen , whe he hey will also
use he ein es men op ion. As pa o he ap-
p oach o he ein es men o p o i s in one’s
business, i is also possible o obse e a di e -
en app oach om he poin o iew o he size
o he en e p ises. I can be assumed ha small
and medium-sized companies will end o ein-
es less han la ge en e p ises. The e may also
be a di e ence in app oaches o ein es men
wi hin Eu ope. Den al businesses in Cen al
and Eas e n Eu ope a e likely o be a he
small and medium-sized. Wellalage and Reddy
(2020) also men ion in hei a icle ha SMEs
ein es p o i s in hei business less. Di e en
app oaches o ein es men , bu also he o m
o den al businesses be ween he coun ies
o Wes e n Eu ope and he coun ies o Cen al
and Eas e n Eu ope, a e no he only ones. Di -
e ences in o he heal h a eas a e also e iden .
This di e ence is also add essed by Koloss á y
e al. (2021). Thi y yea s a e he ansi ion
pe iod, s a ing in 1989, he coun ies o Cen al
and Eas e n Eu ope, ep esen ing one- i h o
he en i e Eu opean popula ion, sha e many
his o ical, social, poli ical, economic, and cul-
u al cha ac e is ics. The e is s ill a signi ican
gap be ween Cen al and Eas e n Eu opean
coun ies and Wes Eu opean coun ies. Ko-
loss á y e al. (2021) epo ha di e ences
in isk ac o s and pe iphe al ascula ca e
ac oss Eu ope appea o be angible and can
be conside ed a signal o exis ing di e ences.
Imp o emen s in esea ch and he de elopmen
and c oss-bo de sha ing o scien i ic da a a e
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Finance
essen ial o ini ia e and acili a e con e gence
in his a ea.
The di e ence in den is y’s app oach
o ein es ing p o i s in o i s business can also
be seen ac oss he heal hca e sys ems used
in a gi en coun y. The wo a o emen ioned
heal hca e sys ems a e used in he Eu opean
Union. The Be e idge model (Na ional Heal h
Se ice Sys em) is used by 12 EU coun ies:
Denma k, Finland, Cyp us, Es onia, G eece,
I eland, I aly, La ia, Mal a, Po ugal, Spain,
and Sweden. The Bisma ck model (Compulso-
y Uni e sal Heal h Insu ance Sys em) is used
by 15 EU coun ies: Aus ia, Belgium, Bulga ia,
C oa ia, Czech Republic, F ance, Ge many,
Hunga y, Li huania, Luxembou g, Ne he lands,
Poland, Romania, Slo akia, Slo enia. In o he
selec ed Eu opean coun ies (i.e., G ea B i ain
and No way) ha a e es ed bu a e no pa o
he EU, he Be e idge model o he heal hca e
sys em is used.
Las bu no leas , in his pa icula case,
acco ding o Soliman (2008), DuPon analysis
decomposes e u n-on-ne -ope a ing-asse s
(RNOA) in o wo mul iplica i e componen s,
i.e., p o i ma gin and asse u no e . Bo h a e
in luenced by hei a ilia ion o he indus y.
The use o DuPon analysis is also possible
in he a ea o heal h economics da a. This
is also sol ed by Tu ne e al. (2015), who
analyse he p o i abili y o hospi als and, o
hese pu poses, s a e ha i is also possible
o use DuPon analysis. This analysis is used
o assess he quali y o he income. By b eaking
down e u n on equi y in o p o i ma gin, o al
asse u no e , and capi al s uc u e, DuPon ’s
analysis e eals wha d i es o e all p o i abili y.
Tu ne e al. (2015) ind ha in es o -owned
hospi als ha e la ge p o i ma gins, highe e -
iciency, and a e mo e le e aged. Doo asamy
(2016) also posi i ely e alua ed he DuPon
analysis by poin ing ou ha s ock ma ke ola-
ili y makes in es men decisions con o e sial.
In es ing a ce ain amoun o money equi es
a p ope analysis o make he necessa y deci-
sion. DuPon analysis can con ibu e o his.
P o i b eakdown is impo an o assessing
p o i abili y, and, u he , a classi ica ion scheme
imp o es p o i abili y o ecas s as well (Fai ield
e al., 1996). Fai ield e al. (2009) men ion
ha using an analy ical model can imp o e
pe o mance p edic ion. An impo an inding
is also ha indi idual componen s o income
can e eal signi ican impac s on indus y, e en
hough his is no e iden in o e all p o i abili y.
Nissim and Penman (2001) also w i e abou
he elemen s o he necessa y accoun ing in-
o ma ion and he b eakdown o a be e o e-
cas o p o i abili y. In hei s udy, Chang e al.
(2014) also d aw a en ion o he issue o using
DuPon analysis o he heal hca e sec o . They
say DuPon componen s a e less in o ma i e
accoun ing signals in heal hca e compa ed
o he indus y-wide sample. Analys s say ha
he moni o ing o he heal hca e sec o should
ocus on changes in p o i ma gins a he han
changes in asse u no e . Only hen will he ac-
cu acy o p o i abili y o ecas s be imp o ed.
Acco ding o Soliman (2008), in p ac ice,
he use o inancial a io indica o s adjus ing
he indus y is less equen , and a la ge pa
o esea ch on he a e age e u n o p o i abili y
assumes whole-economy e e sal goals.
2. Resea ch me hodology
Jus o explain wha DuPon analysis is ocused
on, he main ela ions a e desc ibed by he nex
wo equa ions (Chang e al., 2014; Soliman,
2008). The e u n on equi y (ROE) using
he ea nings a e ax (EAT) o i companies
(excluding hose wi h nega i e equi y) in ime
is desc ibed in Equa ion (1) as ollows:
(1)
To measu e how e ec i ely asse s a e used
in den is y, he e u n on asse s (ROA) using
ea nings be o e in e es and ax (EBIT) is de-
sc ibed in Equa ion (2):
(2)
Ne e heless, o es ima e he le e age e -
ec wi hin ROE and he u no e o asse s wi h-
in ROA, he gene alised me hod o momen s
(GMM) is used. The use o GMM when wo king
wi h panel da a is jus i ied especially when
wo king wi h a dynamic panel, when he de-
layed, explained a iable on he igh -hand side
o he equa ion is also s a is ically signi ican ,
he obse ed pe iod o es ima e he eg es-
sion coe icien s is sho e (T ≤ 10), bu he
c oss-sec ion o he panel includes a la ge
numbe o companies. Because o he gene ali-
sa ion o he me hod o momen s, he p oblem
o he e o scedas ici y o he esidual componen

166 2024, olume 27, issue 1, pp. 161–174, DOI: 10.15240/ ul/001/2024-1-010
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is also sol ed when using he wo-phase model.
The me hod i sel was cons uc ed in hei
wo k by Ande son and Hsiao (1981) and
subsequen ly by Hansen (1982) and u he
ex ended by Hansen e al. (1996). Howe e ,
A ellano and Bond (1991) also con ibu ed o i s
de elopmen by poin ing ou he p oblem o se-
ial co ela ion o he idiosync a ic e o , which
can be unde s ood as a esidual componen
ac oss he panel. A ellano and Bo e (1995)
subsequen ly modi ied he wo-s age, di e -
enced es ima o , which di e ed om he p e-
ious e sion by ejec ing homoscedas ici y.
In he ollowing yea s, howe e , Blundell and
Bond (1998) ocused on he e o componen
o he models, ocusing in pa icula on he pos-
sible dis o ion o he esul s due o sys ema ic
e o s in he es ima ion o he s udied e ec s
o he wo-s age es ima ion. They cons uc ed
a sys emic GMM model ha allows he inclu-
sion o a much la ge numbe o ins umen al
a iables. The p oblem o e o co ec ion was
sol ed only by Windmeije (2005), whose ech-
nical speci ica ion o he obus componen o
he model e ealed no only alsely signi ican
esul s bu also di e en signs o signi ican
coe icien s. A obus e o ec o has become
essen ial o co ec ly es ima ing he wo-s age
coe icien s o he dynamic panel GMM model.
K ip ganz and Swa z (2019) subsequen ly
cons uc ed a modi ied e sion o GMM es ima-
o s wi h panel da a, including many newly in o-
duced diagnos ic es s, including modi ica ions
o he Sa gan and Hansen es s o use in Wind-
meije es ima ion e o co ec ion discussed
by Sande son and Windmeije (2016), la ely
sugges ed e en by Hansen and Lee (2021).
In he case o many s udies, i is no e en en i ely
clea how o es he lag se ing o he ins umen al
a iables, which do no en e he basic es ima ion
equa ion bu a e ela ed o he e o componen
o he model wi h a obus e o ec o . K ip ganz
and Swa z (2019) s a e ha only i he ho-
moscedas ic esidual componen o he model
is con i med, he momen s can be es ed using
he Hausman es . Howe e , And ews and Lu
(2001) al eady p esen he MMSC es (model
and momen selec ion c i e ia), which makes i
possible o compa e models p ecisely in e ms
o hei se ing o he momen s o he a iables o
he eg ession equa ion, including he momen s
o he ins umen al a iables.
The sys em GMM model wi h a dynamic
panel including in a-pe iod da a om pa
o he missing da a is gene ally desc ibed by
he ollowing Equa ion (3):
(3)
whe e: αj – he o al numbe o p pa am-
e e s o es ima ing he explana o y a iable
ROE o i i ms lagged by one yea ( − 1);
xi means 1 × k1 ec o o he p ede e mined a i-
able ROA; β1 is k1 × 1 ec o o pa ame e s ex-
plo ing he le e age o be es ima ed; i – panel
e ec s ha can be co ela ed wi h eg esso s;
εi – he esidual, i.e., he panel o idiosync a ic
es ima ion e o s, ha ing a a iance σϵ
2
.
In ou case o a wo-s age GMM model
and he examined pe iod 2012–2021, Ti = 8,
he p ede e mined a iables a e he mac o-
economic indica o s o he sha e o sa ings
in GDP and he sha e o consump ion in GDP
in selec ed coun ies, and he endogenous
mic oeconomic a iable is he sha e o e ained
ea nings among he eg esso s in he o al as-
se s o he g oup a iable in he c oss-sec ion o
he panel, i ms i. The assump ion o he unc-
ionali y o he model is non-co ela ion νi
and εi . In gene al, ROA and ROE a e ela ed
h ough he DuPon analysis, wi h ROA se ing
as a componen ha in luences ROE along wi h
he inancial le e age mul iplie . A company
ha e icien ly manages i s asse s and capi al
s uc u e can achie e highe ROE and p o ide
be e e u ns o i s sha eholde s (Chang e al.,
2014; Soliman, 2008).
Acco ding o he ORBIS da abase, he e
we e a o al o 15,974 medium-sized companies
ope a ing in he Human Heal h Ac i i ies sec o
om 2012–2021. O hese, 6,954 companies
we e based in he CEE coun ies, while he e-
maining 9,020 companies ope a ed in Wes e n
Eu ope. In pa icula , inancial da a om he bal-
ance shee (i.e., o al asse s, equi y), as well as
he p o i and loss s a emen (EAT, EBIT), wi hin
NACE 86: Human Heal h Ac i i ies, subca e-
go y 862: The Medical and Den al P ac ice
Ac i i ies Sec o , which can also be di ided in o
h ee ca ego ies, o ano he subca ego y 8623:
Den al P ac ice Ac i i ies. F om he desc ip i e
s a is ics in Tab. 1, wo impo an pieces o in o -
ma ion a e d awn. Whe eas p o i abili y has de-
c eased due o he COVID-19 pandemic among
hose den is y companies wi h high owne ship
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Finance
concen a ion measu ed h ough he indepen-
dence indica o epo ed by Bu eau an Dijk,
on he con a y, i has inc eased among hose
companies wi h lowe owne ship concen a-
ion. This does no mean ha he pandemic
posi i ely a ec ed ea nings. Howe e , losses
and di idends could ha e dec eased equi y
and o al asse s acco ding o Equa ions (1–2)
especially among companies wi h dispe sed
owne ship. O cou se, u he analysis o he le-
e age e ec o he DuPon amewo k using
he GMM es ima ion is needed o p o e p ecise-
ly in which coun ies he le e age inc eased, on
he o he hand. The in e qua ile ange demon-
s a es he a iabili y o nonno mally dis ibu ed
da a (ins ead o he s anda d de ia ion while
he da a a e no mally dis ibu ed). Appa en ly,
nei he he compa ison be ween ROE and
ROA, no hei change due o he pandemic can
gi e us simila esul s. The a iabili y o ROE
is a a highe le el. Albei , highe changes
caused by he pandemic may be obse ed
among den al companies wi h a low owne ship
concen a ion. Acco ding o he signi ican e-
sul s, da a ha e been ob ained only o nine Eu-
opean coun ies: Belgium, Denma k, Finland,
F ance, G ea B i ain, I aly, No way, Po ugal,
and Spain. Due o he insigni ican esul s o
no epo ing he in o ma ion abou hei owne -
ship s uc u e, he o al numbe o in es iga ed
companies is 1,128.
Technically, he STATA x dpdgmm com-
mand de eloped by K ip ganz (2019) has been
deployed o ge he wo-s ep sys em GMM es-
ima es in Tab. 2. In pa icula , i is he Blundell
and Bond (1998) echnique wi h he obus
bias-co ec ed a iance-co a iance ma ix o
s anda d e o s, ecommended by Windmeije
(2005). Su ely, he A ellano-Bond es o ze o
au oco ela ion in i s -di e enced e o s o es
ze o hypo hesis ha condi ions in he model a e
alid. Fu he mo e, acco ding o Windmeije
(2018), he p oblem o unde iden i ica ion has
been es ed by C agg-Donald’s obus compa -
a i e usabili y e alua ion (Lag ange Mul iplie
e sion) and Kleibe gen-Paap’s obus limi ed
in o ma ion maximum likelihood (LM e sion).
Howe e , he p oblem o o e iden i ica ion
has been e i ied by he Sa gan-Hansen
es s. Only he esul s highligh ed in bold a e
compa able. Dynamic panel da a modelling
is ine icien in cases wi h insigni ican lagged
L.ROE. Excep o Po uguese companies
wi h a low owne ship s uc u e, he COVID-19
pandemic has a ec ed he echnical diagnos-
ics o GMM models in a good way, especially
in he case o companies wi h a high owne ship
s uc u e. Bo h cases o den is y companies
in No way ha e been jus alse-signi ican
due o he p oblem wi h he unde iden i ica-
ion o models. All hese cases a e highligh ed
in g ey in Tab. 2 wi hin he nex sec ion.
3. Resea ch esul s
Compa ed o he ele an e iewed li e a u e,
se e al di e ences should be highligh ed be o e
he discussion. E en hough Soliman (2008)
decomposes e u n-on-ne -ope a ing-asse s
(RNOA) using DuPon analysis, i has been di -
e en in his pa icula case. Speci ically, cash
and cash equi alen s should ha e been includ-
ed in asse s, since companies ea ned a leas
Ex an e pe iod 2012–2019 Pandemic pe iod 2020–2021
HIGH LOW HIGH LOW
Median
ROE 31.30 30.96 29.73 33.41
ROA 21.22 20.96 19.52 22.56
In e qua ile ange
ROE 28.82 26.91 30.70 30.31
ROA 17.56 15.75 17.21 19.05
F equency 7,160 1,864 1,790 466
Sou ce: own
Tab. 1: Desc ip i e s a is ics
168 2024, olume 27, issue 1, pp. 161–174, DOI: 10.15240/ ul/001/2024-1-010
Finance
some inancial e enues du ing he COVID-19
pandemic. Liquidi y and wo king capi al would
ha e ecei ed a conside able deg ee o a -
en ion conce ning he pandemic in u u e
esea ch. Ne e heless, some ecen s udies
used DuPon analysis wi hin heal h econom-
ics esea ch (Chang e al., 2014; Tu ne e al.,
2015), in es iga ing a speci ic indus y, such as
he den al indus y, so-called den is y, is much
mo e e icien han in es iga ing hospi als nei-
he ha ing he po olio o only heal h business
ac i i ies, no ocusing on a pa icula business
ela ed o one speci ic heal h issue. Howe e ,
he esul s o GMM es ima es sugges ha Du-
Pon analysis can iden i y no only inancially
heal hie companies bu e en e eal a po en ial
in es men oppo uni y compa ing den is y
among di e en coun ies (Doo asamy, 2016;
Fai ield e al., 2009; Nissim & Penman, 2001).
Fu he mo e, a sizable public den al se ice
wi h sala ied employees and equipmen ha
is unded by gene al o local axes is a hallma k
o he Be e idge model, some imes e e ed
o as he Na ional Heal h Se ice (NHS) sys em.
When i comes o educing he DMFT index
(decayed, missing, and illed ee h), he No dic
Fig. 1: Es ima ed DuPon inancial le e age using GMM models
No e: ***p < 0.001; **p < 0.01, *p < 0.05; (insigni ican ), missing non- obus , o (X) alse signi ican esul s.
Sou ce: own
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2024, olume 27, issue 1, pp. 161–174, DOI: 10.15240/ ul/001/2024-1-010
Finance
na ions and he UK ha e ou pe o med he Be -
e idge egion in he ield o s oma ology (Pinilla
& González, 2009). Se e al na ions, including
he UK, Denma k, Finland, I aly, No way, Po -
ugal, and Spain, ha e adop ed his concep
wi hin he esul s. The Compulso y Uni e sal
Heal h Insu ance Sys em, o he Bisma ck
model, on he o he hand, bases heal hca e
inancing on manda o y sala y paymen s.
I is claimed ha he economic down u n, poli i-
cal unp edic abili y, widening social di ides, and
ising unemploymen a es make he implemen-
a ion o he Bisma ckian insu ance p og am
in many coun ies seem un easible. Coun ies
in he FSE ( o me socialis economies) egion
a e linked o his model. Al hough, Belgium and
F ance ha e adop ed his sys em o den is y
as well. Ne e heless, he ma e ial ha is cu -
en ly a ailable omi s impo an in o ma ion e-
ga ding he p ecise applica ion o he Bisma ck
model o s oma ology, u he also acco ding
o he owne ship s uc u e o den is y compa-
nies (Deppe & O esko ic, 1996; Welch, 2003).
The inancial le e age mul iplie magni-
ies he impac o ROA on ROE in Tab. 2 wi h
he sys em GMM es ima es. I a company
akes on mo e deb ela i e o equi y (highe
inancial le e age), a smalle ROA can s ill
esul in a highe ROE due o he inc eased
inancial le e age (Chang e al., 2014; Tu ne
e al., 2015), i.e., hose companies wi h
a LOW concen a ion o owne ship s uc u e.
The compa ison is made om se e al poin s
o iew. Fi s , he es ima ed le e age e ec can
be compa ed om he owne ship concen a-
ion poin o iew. Excep o he p e-pandemic
pe iod in I aly, he le e age e ec o DuPon
analysis measu ed by he equi y mul iplie
ends o be sligh ly lowe among den is y
companies wi h HIGH owne ship concen a ion
in Fig. 1. Howe e , i ends o be lowe du ing
he pandemic pe iod. I means ha u u e p o -
i s will be many imes mo e han he cos o bo -
owing amongs den is y i ms wi h mo e han
one owne , which suppo s he idea o me ge s
amongs den is y companies. This esul does
make sense i he LOW dispe sed owne ship
allows he use o deb inancing a he han
equi y. On he o he hand, his esul is sup-
po ed by Caselli and Neg i (2021), who a gued
ha he owne uses equi y a he han deb ,
i.e., he case o a HIGH concen a ed owne -
ship s uc u e. Hence, mo e owne s will ei he
dec ease he cos s o capi al, as well as allow
he usage o a highe le el o deb capi al. Sec-
ond, he impac o he COVID-19 pandemic can
be seen in selec ed cases among bo h g oups
o den is y companies. The pandemic and
he accompanying economic down u n ha e
an impac on den is y, jus like hey do on o he
heal hca e sec o s (Pa el, 2020), and e en om
he DuPon inancial le e age poin o iew, his
impac is e iden in Fig. 1. On he one hand,
dec easing (o inc easing) equi y caused by
he po en ial sha e o e ained ea nings (o ein-
es men s) du ing he pandemic will inc ease (o
dec ease) he p o i abili y o a i m. On he o he
hand, any change will a ec ROE mo e han
ROA. Howe e , we can see a nega i e change
in he e ec o le e age in F ance (1.12 ex-an e,
1.04 ex-pos ), Po ugal ( om 2.00 o 1.31), and
Spain (1.91 and 1.67) among companies wi h
HIGH owne ship concen a ion. This esul sup-
po s he idea o ein es men s du ing he pan-
demic de eloped in he p e ious pa ag aph.
Qui e he opposi e is he massi e posi i e
change o le e age in Belgium (1.35 ex-an e,
1.69 ex-pos ) and I aly (1.13 and 1.76) among
companies wi h LOW owne ship concen a-
ion, caused by nega i e changes in equi y.
Howe e , his esul could ha e been caused
by me ge s in den is y, no only by losses e-
la ed o he pandemic.
In he Bisma ck model (i.e., Belgium and
F ance), den al ca e is dependen on social
insu ance con ibu ions, whe e bo h employe s
and employees con ibu e o a heal h insu ance
und. Hence, he p o i abili y o den al ca e can
be in luenced by pa ien ’s abili y o access and
a o d den al se ices based on hei insu ance
co e age. Den is s can nego ia e eimbu se-
men a es wi h insu ance companies, which
can a ec hei income. On he o he hand,
in he Be e idge model (i.e., I aly, Po ugal,
and Spain), den is y is p ima ily unded by
he go e nmen h ough axa ion, which means
ha den al ca e may be mo e likely o be in-
cluded as pa o he publicly unded heal hca e
sys em. The p o i abili y o den is s can be
in luenced by go e nmen -se eimbu semen
a es, which may be lowe han wha hey
could cha ge in a pu ely p i a e sys em. How-
e e , a consis en pa ien base and educed
adminis a i e bu den could o se his. Mos
impo an ly, he COVID-19 pandemic a ec ed
di e en economies a e y di e en le els,
while he I alian economy belongs o hose
mos a ec ed in he wo ld. Pe haps ha would