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Abstract

Theoretical and empirical insights into the linkages between firm profitability and macroeconomic conditions are developed for nineteen agribusinesses. The hypothesis investigated in this analysis is that firm financial performance is a function of firm specific factors and macroeconomic conditions common to all firms. Seemingly unrelated regression with an unequal number of observations is used to estimate macroeconomic linkages. Empirical results indicate that macroeconomic conditions have differing affects on firm profitability dependent on a firm's financial structure and the market segment in which it operates. Capital intensive industries and highly leveraged firms have higher business risk and are more susceptible to macroeconomic conditions.

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