Society's well-being and firm profitability. The case of Poland

The aim of the study is to examine the impact of society's economic well-being determinants - above and beyond the firm-specific and macroeconomic determinants - on firm profitability in Poland. Based on stakeholder theory we hypothesized that the economic well-being of society can influence firm performance. Therefore, we included real wage and salary growth, internal migration, international migration, and natural increase variables in the regression models. We applied four models with different sets of variables using pooled ordinary least square regression, as well as fixed and random effects regressions with robust standard errors clustered at the firm level. The dataset covers the period from 2004 to 2021, comprising 5400 firm-year observations from Poland in the wholesale and retail trade sector. We found that firm profitability generally increases with higher inflation and exchange rate depreciation. Moreover, in models including society's economic well-being variables, GDP growth is no longer a significant determinant of firm profitability. Most importantly, the study demonstrates a positive relationship between real wage and salary growth and firm profitability. We also found that international migration is negatively associated with firm profitability. Regarding natural increase, the study suggests that it has a positive effect on return on equity, but not on return on assets.