The Impact of Inflation on the Profitability of Businesses: Evidence from Kosovo

Abstract

The aim of this paper is to assess how inflation affects the financial performance of businesses operating in Kosovo. More precisely, the impact of inflation and profit tax on the profitability of businesses is analysed, as well as the relationship between the profitability of businesses with the inflation level, the profit tax, the net wages level and the GDP level of Kosovo for the period 2018 - 2021. In this study, the quantitative approach was applied and the descriptive and verification method was used as the research method. Analyses performed include linear regression analysis and linear trend analysis. The data used in the research are secondary data provided by the financial statements of businesses operating in Kosovo published by the Ministry of Finance, Labour and Transfers. The research sample included 120 businesses. The results of this study show that, for the analysed period 2018 - 2021, inflation and profit tax have a positive impact on the profitability of businesses in Kosovo, as well as there is a positive relationship between the profitability of businesses with the inflation level, the tax on profit, the net wages level and the GDP level in Kosovo. This study contributes to the literature as evidence that makes clear the impact of inflation on the profitability of businesses in Kosovo and can serve as a good basis for other researchers who analyse similar aspects in the future.

Received: 20 March 2023 / Accepted: 13 June 2023 / Published: 5 July 2023