| Abstract [eng] |
This master's thesis analyzes the impact of the economic cycle on profitability and solvency indicators in the Lithuanian construction sector. The relevance of the study lies in the sector’s sensitivity to economic fluctuations, which have a direct impact on the financial condition of companies. Economic expansions and contractions change the business environment, making it important to understand how key financial indicators respond to these shifts. The aim of the thesis is to assess the influence of economic cycle fluctuations on profitability and solvency indicators in the Lithuanian construction sector. To achieve the research objectives, a theoretical analysis of the economic cycle was conducted, covering its main phases—expansion, downturn, recession, and recovery—as well as both internal and external factors that drive these changes. In the empirical part, key macroeconomic indicators commonly used for assessing the economic cycle were analyzed: changes in gross domestic product (GDP), unemployment rate, inflation, interest rates, the number of building permits issued, and the construction sector confidence index. Statistical methods such as correlation analysis and multiple regression analysis were applied in order to assess both individual and combined effects of macroeconomic factors on profitability and solvency indicators. Data were collected from Valstybinė duomenų agentūra and Registrų centras, covering the period from 2005 to 2023. The research results revealed that profitability indicators—especially return on equity, return on assets, and change in sales revenue—are more sensitive to economic cycle fluctuations than solvency indicators. During periods of economic downturn, these values decrease significantly, while during growth phases, they recover gradually. In contrast, most solvency indicators, except for the debt-to-equity ratio, did not show a strong statistical relationship with macroeconomic variables. When evaluating each macroeconomic indicator separately, interest rates and unemployment were found to have the greatest impact on financial performance, while changes in GDP and inflation had minimal significance. The number of building permits and the construction confidence index did not demonstrate a strong correlation with macroeconomic indicators and therefore cannot be considered reliable early-warning signals. The results of the thesis may be useful to company managers seeking to assess the financial resilience of their operations in the context of macroeconomic changes. The research can also be further developed by incorporating internal company-specific factors or conducting comparative analyses with other sectors or countries. |
