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

11 Pages Posted: 30 Dec 2013

See all articles by Muhammad Mubeen

Muhammad Mubeen

Bilkent University, Department of Management, Students; IQRA University - IQRA University (Gulshan Campus)

Irfan Lal

Institute of Business Management (IoBM); University of Karachi - Applied Economics Research Centre; Institute of Business Management

Adnan Hussain

Benazir Bhutto Shaheed University, Lyari, Karachi; University of Karachi - Applied Economics Research Centre

Date Written: December 29, 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.

Keywords: Profitability, Dupont Identity, Panel Least Square

JEL Classification: G12, G39, C23

Suggested Citation

Mubeen, Muhammad and Lal, Irfan and Hussain, Adnan, Determinant of Return on Assets and Equity and Industry Wise Effects: Evidence from KSE (Karachi Stock Exchange) (December 29, 2013). Available at SSRN: https://ssrn.com/abstract=2372792 or http://dx.doi.org/10.2139/ssrn.2372792

Muhammad Mubeen (Contact Author)

Bilkent University, Department of Management, Students ( email )

Ankara
Turkey

IQRA University - IQRA University (Gulshan Campus) ( email )

Abid Town, Block-2, Gulshan-e-Iqbal
Karachi, Sindh 75300
Pakistan

Irfan Lal

Institute of Business Management (IoBM) ( email )

Plot # 84
Korangi Creek
Karachi, Sindh 75190
Pakistan

University of Karachi - Applied Economics Research Centre ( email )

Main University Road
Karachi University
Karachi, SC Sindh 75270
Pakistan
00923212348843 (Phone)

Institute of Business Management ( email )

D-93040 Regensburg
Germany

Adnan Hussain

Benazir Bhutto Shaheed University, Lyari, Karachi ( email )

Faqir Mohammad Dura Khan Road,
Near cheel chowk
Karachi, Sindh 75500
Pakistan

HOME PAGE: http://www.bbsul.edu.pk

University of Karachi - Applied Economics Research Centre ( email )

Mail University Road
Karachi University
Karachi, SC Sind 75270
Pakistan

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