Operating efficiency, leverage, and profitability growth in Ecuadorian MSMEs
DOI:
https://doi.org/10.36881/ri.v10i2.1396Keywords:
MSMEs, profitability, panel data, fixed effects, EcuadorAbstract
Micro, small, and medium-sized enterprises (MSMEs) play a central role in emerging economies, although their financial sustainability remains fragile. Therefore, this study analyzes the determinants of profitability in Ecuadorian MSMEs using nationally available administrative financial information for the period 2014–2024. Methodologically, panel data models with fixed effects at the firm level are employed, allowing for the control of unobservable heterogeneity that remains constant over time. Estimation is performed using robust standard errors grouped by firm to correct for heteroscedasticity and serial correlation, and the model selection is supported by the Hausman test. The results show that the financing structure and asset utilization efficiency are the main factors associated with financial performance, evidenced by the positive effect of debt and sales turnover on economic and financial profitability. In contrast, liquidity and firm size exhibit more complex relationships, suggesting the coexistence of operating diseconomies and leverage effects. From a theoretical perspective, the findings contribute to the literature on corporate finance in emerging economies by providing evidence based on administrative microdata and controlling for unobservable heterogeneity. Overall, the results indicate that the sustainability of corporate performance depends primarily on capital productivity and effective access to finance, rather than on growth in scale or liquidity accumulation.
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