The Determinants of Financial Risk Performance of Target Corporation In United States

Leow, Maggi (2026): The Determinants of Financial Risk Performance of Target Corporation In United States.

Abstract

This research study examined firm specific (internal) and macroeconomic (external) factors of determining financial risk performance at Target Corporation in the United States during a ten-year period, 2014-2023. The company had variability in operating profitability and a number of indicators had indicated an increase in financial pressure, which is why it is essential to know what factors determine financial risk. Financial ratios and economic indicators were analyzed with the help of SPSS which included correlation and regression models. The three models were created to identify the impact of internal factors, external factors, and a combination of both sets of variables on Operating Profit Margin (OPM) that served as the primary proxy of financial risk. As per the results, Net Profit Margin (NPM) has been identified as the most important internal factor to enhance OPM, whereas Operational Risk has been identified as the most important internal factor to decrease OPM. With GDP and interest rate having weak effects on the outside, it means that Target is more affected by its internal managerial factors than the macroeconomic factors. The results indicate that the optimization of costs, operational failures, and the risk management of interest rate risks are pivotal in reducing the financial risk. This study has the limitation of time as it considers a single company and 10 years of data, which might not portray the industry in general; thus, further studies can involve multiple companies and other financial indicators.

• Item Type: MPRA Paper
• Language: English
• Keywords: Target Corporation, Financial Risk Performance, United States, Operating Profit Margin, Net Profit Margin, Operational Risk, GDP, Interest Rate
• Subjects: G - Financial Economics > G3 - Corporate Finance and Governance; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill

References

Agüero, J. O. (2006). Las dimensiones del riesgo en las desiciones financieras de empresas. Visión de Futuro, 5(1), 1. https://www.redalyc.org/comocitar.oa?id=357935464001

Alonso García, N. (2023). Inflation (pp. 209–213). Edward Elgar Publishing. https://doi.org/10.4337/9781800377363.ch48

Asyifa, A. N., Febrianty, S. A., & Abdillah, A. (2025). Kajian Kinerja Keuangan dengan Metode Rasio Profitabilitas pada PT Akasha Wira International Tbk Periode 2022-2024. Anggaran, 3(3), 443–457. https://doi.org/10.61132/anggaran.v3i3.1752

Auliya, N., Gemini, P., & Abdullah, A. (2024). Implikasi Laba Operasi dan Modal Kerja terhadap Laba Bersih PT. Nippon Indosari Corpindo. Santri, 2(5), 55–65. https://doi.org/10.61132/santri.v2i5.890

Baggs, J., & Brander, J. A. (2006). Trade liberalization, profitability, and financial leverage. Journal of International Business Studies, 37(2), 196–211. https://doi.org/10.1057/PALGRAVE.JIBS.8400183 Banks, E. (2014). Liquidity risk defined. In Liquidity Risk: Managing Funding and Asset Risk (pp. 3-23). London: Palgrave Macmillan UK.

BarkerWilliam, A., & McNelisPaul, D. (2013). Currency Exchange Rates. http://www.cfapubs.org/doi/abs/10.2469/inv.v2013.n2.1?journalCode=inv

Basovskaya, E., & Basovskiy, L. (2024). The Impact of Unemployment on Wages and Profits. Научные Исследования и Разработки. https://doi.org/10.12737/2587-9111-2024-12-1-4-8

Bastian, E. F., Charles, S., & Marie, J. (2024). Inflation regimes and hyperinflation: a Post-Keynesian/structuralist typology. Cambridge Journal of Economics. https://doi.org/10.1093/cje/beae009

Chen, D. M., & Yang, L.-L. (2009). An Empirical Test of a Resources Deployment Portfolio (RDP) Approach to Business Group ROE Decomposition. Review of Pacific Basin Financial Markets and Policies, 12(04), 695–720. https://doi.org/10.1142/S0219091509001812

Chen, K. and Pan, C. (2012). An Empirical Study of Credit Risk Efficiency of Banking Industry in Taiwan, Web Journal of Chinese Management Review, 15(1), 1-16

Cruz-García, P., Fernández de Guevara, J., & Maudos, J. (2017). Interest Rates and Net Interest Margins: The Impact of Monetary Policy (pp. 5–33). Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-54894-4_2

Daniëls, T. R., & Kamalodin, S. (2016). The Return on Equity of Large Dutch Banks. Research Papers in Economics. https://EconPapers.repec.org/RePEc:dnb:dnbocs:1405

Dewi, L., & Kitri, M. L. (2020). Operational Risk Analysis in Department of Enterprise Risk Management of PT. XYZ Based on ISO 31000: 2018 Framework. 33–38. https://doi.org/10.2991/AEBMR.K.200415.007

Dickstein, D. I., & Flast, R. H. (2012). What Is Operational Risk (pp. 17–47). John Wiley & Sons, Inc. https://doi.org/10.1002/9781119200987.CH2

Đuričin, S., Beraha, I., & Jeločnik, M. (2024). Categorizing enterprises through advanced operating profit margin metrics. International Review, 1–2, 53–60. https://doi.org/10.5937/intrev2401053d

Fachrudin, K. A., & Absah, Y. (2021). Analysis of Effect of Capital Expense Efficiency, Operating Expense Efficiency and Exchange Rate Difference to Financial Performance in PT.Telkomsel. International Journal of Research, 8(2), 155–162. https://doi.org/10.52403/IJRR.20210223

Fitrilia, A. D., & Nilwan, A. (2025). The effect of current ratio and debt to equity ratio on net profit margin (empirical study on companies in the plastics and packaging sub-sector for the period 2021-2023 listed on the idx). International Journal of Accounting, Management, Economics and Social Sciences, 3(1), 130–144. https://doi.org/10.61990/ijamesc.v3i1.457

Green, T. C., & Figlewski, S. (1999). Market risk and model risk for a financial institution writing options. The Journal of Finance, 54(4), 1465–1499. https://doi.org/10.1111/0022-1082.00152

Hamilton, A. (2018). Understanding Exchange Rates and Why They Are Important | Bulletin – December Quarter 2018. https://www.rba.gov.au/publications/bulletin/2018/dec/understanding-exchange-rates-and-why-they-are-important.html

Im, J.-B. (2005). WTO Agricultural Tariffication with Lessons for Tariff Adoption. East Asian Economic Review, 9(1), 87–106. https://doi.org/10.11644/KIEP.JEAI.2005.9.1.137

Judijanto, L. (2025). Analyzing Profitability Ratios as a Tool to Assess Financial Performance. Journal Economic Excellence Ibnu Sina, 3(1), 233–243. https://doi.org/10.59841/excellence.v3i1.2378

K S, N. (2023). A study on return. on equity & return on assets at featherlite product private limited with respect to office equipments, rajanukunte. Indian Scientific Journal Of Research In Engineering And Management. https://doi.org/10.55041/ijsrem26666

Kassi, D. F., Rathnayake, D. N., Louembe, P. A., & Ding, N. (2019). Market Risk and Financial Performance of Non-Financial Companies Listed on the Moroccan Stock Exchange. 7(1), 20. https://doi.org/10.3390/RISKS7010020

Kiesel, R., Liebmann, T., & Stahl, G. (2006). Mathematical Framework for Integrating Market and Credit Risk (pp. 367–389). Academic Press. https://doi.org/10.1016/B978-012088438-4.50017-4

Komala, C., & Arifin, M. (2018). Analisis Penerapan Risiko Kredit Dan Risiko Operasional Terhadap Pertumbuhan Laba Perbankan. 6(2), 109–115. https://doi.org/10.37641/JIMKES.V6I2.160

Kopitin, C. (2013). Managing risk of liquidity: a new dimension of risk management. International Journal of Risk Assessment and Management, 17(2), 89. https://doi.org/10.1504/IJRAM.2013.057102

Kou, H.-I., Hu, J.-L., & Hwang, H. (2001). Tariff Policy and Environmental Qualities of Imported Goods. Journal of Economic Integration, 16(3), 313–343. https://doi.org/10.11130/JEI.2001.16.3.313

Kunii, C. Y., & Filho, J. M. (2019). A influência da liquidez e do endividamento na margem ebit das empresas brasileiras de capital aberto. http://eventoscopq.mackenzie.br/index.php/jornada/xvjornada/paper/download/1470/1030

Lee, Y., & Mowry, B. (2009). Involuntary Part-Time Workers and the Deficiencies of the Unemployment Rate. https://www.clevelandfed.org/newsroom-and-events/publications/economic-trends/economic-trends-archives/2009-economic-trends/et-20090507-involuntary-parttime-workers-and-the-deficiencies-of-the-unemployment-rate.aspx

Li Hui. (n.d.). The Evolution of GDP Accounting Methods: From Traditional GDP and Green GDP to Sustainable Development GDP https://doi.org/10.3969/j.issn.1007-6921.2006.23.016

Li, M., Nissim, D., & Penman, S. H. (2014). Profitability Decomposition and Operating Risk. Social Science Research Network. https://doi.org/10.2139/SSRN.3778720

Li, M., Nissim, D., & Penman, S. H. (2014). Profitability Decomposition and Operating Risk. Social Science Research Network. https://doi.org/10.2139/SSRN.3778720

Lukic, R. (2018). The Analysis of the Operative Profit Margin of Trade Companies in Serbia. 19(5), 458–475. https://www.ceeol.com/search/article-detail?id=737549

Marconi, N., Magacho, G. R., Magacho, G. R., Machado, J. G. R., & Leão, R. de A. R. (2020). Profit margins, exchange rates and structural change: empirical evidences for the period 1996-2017. 40(2), 285–309. https://doi.org/10.1590/0101-31572020-3093

Matthews, S. T. (2013). Letter to the editor. One-tailed significance tests and the accounting for α. Clinical and Experimental Pharmacology and Physiology, 40(8), 594. https://doi.org/10.1111/1440-1681.12128

Merville, L. J., Hayes-Yelken, S., & Xu, Y. (2001). Identifying the Factor Structure of Equity Returns. The Journal of Portfolio Management, 27(4), 51–61. https://doi.org/10.3905/JPM.2001.319813

Moro Visconti, R. (2011). Inflation Risk and Real Corporate Governance. Social Science Research Network. https://doi.org/10.2139/SSRN.1976542

Nariswari, T. N., & Nugraha, N. M. (2020). Profit growth: Impact of net profit margin, gross profit margin and total assets turnover. International Journal of Finance & Banking Studies, 9(4), 87-96.

Nhuta, S. (2014). A hyperinflationary environment causes deviation from and dismantling of corporate governance trends: case of zimbabwe. https://ijern.com/journal/2014/November-2014/37.pdf

Nikolaou, K. (2009). Liquidity (risk) concepts: definitions and interactions. Research Papers in Economics. https://ideas.repec.org/p/ecb/ecbwps/20091008.html

Nohrouzian, H. (2015). An Introduction to Modern Pricing of Interest Rate Derivatives. http://www.diva-portal.org/smash/record.jsf?pid=diva2:824201

O’Neill, D. (2014). Gross domestic product. 131–136. https://doi.org/10.4324/9780203796146-32

Peling, I. A. A., & Sedana, I. B. P. (n.d.). The effect of credit risk and operational risk on profitability with capital adequacy variables as a mediating variable: a study on indonesian state-owned banks for the period of 2015-2019. https://doi.org/10.18551/rjoas.2021-07.02

Perdana, S., & Hartanti, E. (2017). Pengaruh opm, roe dan roa terhadap perubahan laba pada perusahaan lembaga pembiayaan di indonesia. 9(1), 79. https://doi.org/10.30998/SOSIOEKONS.V9I1.1690

Perdana, S., & Hartanti, E. (2017). Pengaruh opm, roe dan roa terhadap perubahan laba pada perusahaan lembaga pembiayaan di indonesia. 9(1), 79. https://doi.org/10.30998/SOSIOEKONS.V9I1.1690

Pilbeam, K. (2005). Monetary Policy and Interest Rate Determination (pp. 61–95). Macmillan Education UK. https://doi.org/10.1007/978-1-349-26273-1_4

Račić, Ž., Ercegovac, D., & Milić, D. (n.d.). The Impact of Macroeconomic Indicators on the Business Performance of Financial Institutions in the Republic of Serbia: Panel Data Analysis. https://doi.org/10.5937/skolbiz1-33232

Rahayu, N. J., & Suryaningsum, S. (2025). Analisis operating profit margin perusahaan infrastruktur di BEI Tahun 2021-2023. https://doi.org/10.31316/qrobss.v2i2.7574

Ramaadhianti, V., Septiwidya, W., Juwainah, J., Salsabila, A. W., Septianay, A. D., & Yulaeli, T. (2023). Faktor-Faktor Yang Mempengaruhi Current Ratio, Debt Equity Ratio, Debt Asset Ratio, Dan Perputaran Modal Kerja Terhadap Return On Asset. Student Scientific Creativity Journal, 1(5), 168–190. https://doi.org/10.55606/sscj-amik.v1i5.1973

Ramadhan, A. S., & Nuraliati, A. (2020). The Effect of Net Profit Margin and Earning Per Share on Share Prices. 4(3), 371–379. https://doi.org/10.36555/ALMANA.V4I3.1475

Rissman, E. R. (1986). What is the natural rate of unemployment. Economic Perspectives, 10, 3–17. https://ideas.repec.org/a/fip/fedhep/y1986isepp3-17nv.10no.5.html

Robertson, D. (2016). Introduction to Operational Risk (pp. 1–17). Palgrave Macmillan, New York. https://doi.org/10.1007/978-1-137-44217-8_1

Russon, M. G., & Bansal, V. K. (n.d.). A Refined Model to Predict Near-Term US Real GDP Growth. https://doi.org/10.33423/jabe.v23i5.4561

Satriani, S., B, M. K., Mardiastuti, W., Hasanuddin, H., & Akbar, M. (2021). ANALISIS MARGIN LABA BERSIH TERHADAP PENCAPAIAN PENINGKATAN LABA ATAS PENDAPATAN YANG DIPEROLEH PADA USAHA LAUNDRY (STUDI KASUS USAHA DI MAKASSAR). Media Bisnis. https://doi.org/10.34208/mb.v13i1.662

Schultze, C. L. (1975). Falling Profits, Rising Profit Margins, and the Full-Employment Profit Rate. 1975(2), 449–472. https://doi.org/10.2307/2534108

Scott, A., Amajuoyi, P., & Adeusi, K. B. (2024). Effective credit risk mitigation strategies: Solutions for reducing exposure in financial institutions. Magna Scientia Advanced Research and Reviews, 12(1), 198–211. https://doi.org/10.30574/msarr.2024.11.1.0084

Singh, R., Gupta, C. P., & Chaudhary, P. (2024). Defining Return on Assets (ROA) in empirical corporate finance research: a critical review. Empirical Economics Letters.

Skenderi, N., & Uka, A. (2015). Types and Duration of Unemployment in Kosovo. Mediterranean Journal of Social Sciences, 6(3), 453. https://doi.org/10.5901/MJSS.2015.V6N3P453

Sroka, Ł., & Wieczorek-Kosmala, M. (2024). Operating risk and firm’s profitability: evidence from non-listed manufacturing firms from v4 coun-tries. Contemporary Economy, 15(1 (42)). https://doi.org/10.26881/wg.2024.1.01

Stanek, M. B. (2002). A review of exchange rate policies and their effect upon nations and firms. Management Research News, 25(4), 19–34. https://doi.org/10.1108/01409170210783179

Suryaningsum, S., & Ayusulistyaningrum, D. (2025). Analisis rasio profit margin dan operating margin antara sektor industri energi dan industri finansial. Efektif: Jurnal Bisnis Dan Ekonomi, 15(2 Desember), 126–147. https://doi.org/10.37159/mxpxtw08

Syamni, G., & fe, martunis. (2013). Pengaruhopm,roe danroa terhadap perubahan laba pada perusahaan telekomunikasi di bursa efek indonesia. 2(4), 103320. http://repository.unimal.ac.id/256/

Target corporation announces plans to discontinue Canadian operations. (2015, January 15). Target.com. https://corporate.target.com/press/release/2015/01/target-corporation-announces-plans-to-discontinue-canadian-operations?utm_source

Tarr, D. G., & Shepotylo, O. (2007). The Structure of Import Tariffs in the Russian Federation: 2001-05. World Bank, Washington, DC. https://doi.org/10.1596/1813-9450-4265

Wilders, R. J. (n.d.). The Determinants of Interest Rates. https://doi.org/10.2139/ssrn.1276558

Yanto, M., Sari, F. M., Andriani, N., Miranty, T. U., Saqinah, S., & Agustinawati, R. A. (2025). Analisis rasio profitabilitas pada pt pratama widya tbk periode 2023-2024. 2(4), 201–211. https://doi.org/10.62017/wanargi.v2i4.5129

Yildirak, K., & Ekinci, C. (2013). A Review of Market Risk Measures and Computation Techniques (pp. 283–302). https://doi.org/10.1016/B978-0-12-415875-7.00017-8