Profitability differences between public and private firms: The case of Norwegian salmon aquaculture

Abstract Capital requirements increase as aquaculture becomes more industrialized, with firms increasing their scale of production and capital intensity. Public listing at stock exchanges can provide improved access and cheaper financing for firms. Since the public listing is a fairly recent phenomenon and relatively few aquaculture firms have entered stock markets, it is useful to investigate the differences in profitability among listed and private aquaculture firms. Our econometric estimates based on a unique panel dataset of Norwegian salmon companies indicate that the sources of profitability, as measured by return on assets (ROA), are different among the two groups of companies. Listed companies are able to increase profitability through working capital optimization; however, they are more negatively affected by operating leverage and liquidity. This indicates that using liquidity as a risk reduction measure is costly in the industry. Although private firms have historically performed better on average in terms of ROA, the difference is not statistically different.