This greater efficiency boosted corporate profitability in 2002 and 2003 despite rather tepid revenue growth. Moreover, a pickup in revenue growth in the second half of last year helped companies leverage those productivity gains, producing a dramatic recovery in overall  BIS Review 23/2004  3  corporate profitability.
Over 2003, economic profits before tax surged more than 18 percent, bringing profit margins to their highest levels in several years. Fourth, risk premiums fell substantially last year as corporate governance scandals receded and investor sentiment turned markedly more positive. The recovery in stock prices reflects this brighter view.