Determinant of Return on Assets and Return on Equity and Its Industry Wise Effects: Evidence from KSE (Karachi Stock Exchange)

Mubin, Muhammad and Lal, Irfan and Hussain, Adnan (2013): Determinant of Return on Assets and Return on Equity and Its Industry Wise Effects: Evidence from KSE (Karachi Stock Exchange). Published in: 1st International Conference on Emerging Issues in Management and Economics No. 1 (15 November 2013)

Abstract

The prime purpose of this research is to find out that from the components of Dupont identity of Return on Equity which component is most consistent or volatile among profit margin, total assets turnover, and equity multiplier in Fuel and Energy Sector, Chemicals Sector, Cement Sector, Engineering Sector, Textiles Sector, and Transport and Communication Sector of KSE 100 index. The purpose of the study was served by taking data from 2004 to 2009 of 51 companies (falling under six mentioned industries) of KSE 100 as Paradigm of Panel Data. The F-Statistics of One Way ANOVA (Analysis of Variance) show that it is Assets Turnover which significantly varies from industry to industry whereas Equity Multiplier and Profit Margin are not much volatile among indifferent industries. Moreover, Adjusted R Square in Panel OLS Analysis was confirming Industry Effect on Newly established firms that they can have the benefit of profitability if they are from Fuel and Energy Sector, Cement Sector and Transport and Communication Sector whereas others Sectors such as Chemicals Sector, Engineering Sectors, and Textiles Sectors does not have that leverage.”

• Item Type: MPRA Paper
• Language: English
• Keywords: Profitability, Dupont Identity, Panel Least Square
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G3 - Corporate Finance and Governance > G39 - Other

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