Purpose The purpose of this paper is to examine the firm-specific and macroeconomic determinants of profitability of Indian manufacturing firms. It assesses the main determinants of firm’s profitability in the pre-crisis and post-crisis period from 2000 to 2015. Design/methodology/approach This methodology splits the factors that influence firm profitability in two groups: firm-specific (internal) factors and macroeconomic indicators. It further aims to look at the consistency of the factors in the pre-crisis and post-crisis period. The return on assets and the net profit margin are considered as proxy for corporate profits. The panel generalized least square and panel vector auto-regression model have been employed, and it is observed that the exchange rate seems to have played a major role in the crisis period by explaining the earning quotient for Indian firms. Findings This paper concludes that the firm-specific variables and exchange rate channels are quite relevant in explaining the profitability of Indian manufacturing firms. It accepts the hypotheses that size and liquidity enhances whereas leverage discourages the profitability. Few exceptions have been observed during the crisis period. The study also concludes that in the short run, the changes in exchange rate are not increasing profitability, but in the long run, it increases profitability as the volatility of nominal exchange rate is positively impacting profitability. Moreover, the study finds that the nominal exchange rate index is more informative and explains that profitability is better than real exchange rate index in the case of Indian manufacturing firms over the study period. Research limitations/implications The managers and the policy makers should give utmost importance to the firm-specific determinants, especially after the crisis period, and consider the appropriate exchange rate to evaluate firm performance for making any change in the policy to make any business profitable. Originality/value This study has been conducted over a longer time by using advanced panel data analysis techniques on the recent data. The study period properly captures the crisis time and the research includes different selection of profitability that highlights corporate earnings pattern. Moreover, validation of the exchange rate sensitivity of profitability over nominal and real exchange rate increases the robustness of the study. Moreover, on Indian manufacturing firms, the study is very significant and unique.

Purpose The purpose of this paper is to provide empirical evidence about the relationship between working capital financing (WCF) and firm profitability in six key manufacturing sectors of Indian Economy. It also aims to capture the change in the financing of working capital requirement over different scenarios of price-cost margin and financial flexibility. Design/methodology/approach The study is undertaken on a sample of 1,211 firms from 6 key manufacturing sectors of Indian economy from 2000 to 2016. The non-linear relationship between WCF and profitability is studied using two-step generalized model of moments (GMM) estimator. Findings The study finds a convex relationship between WCF and profitability among firms in chemical, construction, and consumer goods sectors. Firms in these sectors can finance larger portion of their working capital requirements through short-term debt without negatively impacting profitability. However, a concave pattern of relationship for firms in machinery, metal, and textile industries implies increasing debt financing of working capital requirement would increase profitability for the firms who have financed lower portion of their working capital by short-term bank borrowing. But when a higher proportion of working capital requirements are already financed by short-term debt, a further increase in debt financing may impact profitability negatively. Moreover, the study finds that firms with high financial flexibility and high price-cost margin (except textile) can increase profitability by financing larger portion of working capital requirement through short-term debts and the continuation with risky WCF could increase profitability. Originality/value The study contributes to the literature on working capital in a number of ways. First, no previous study has been undertaken to explore the non-linear relationship between WCF and corporate profitability over a large sample of firms from six key manufacturing sectors of Indian economy. Second, the study uses a quadratic function to explore the non-linear relationship between WCF and profitability. Third, the study explores the relationship between WCF and profitability with respect to the price-cost margin and financial flexibility of firms under different manufacturing sectors of Indian economy. Finally, the study uses advanced two-step GMM, the panel data techniques to handle unobservable heterogeneity and issues of endogeneity within the data sample.

PurposeThe purpose of this paper is to empirically analyze the determinants of capital structure and their long-run equilibrium relationships with firm-specific and macroeconomic indicators for Indian manufacturing firms.Design/methodology/approachThe study is conducted using the panel semi-parametric and non-parametric regression models to identify the key determinants of capital structure. Panel cointegration models are also employed for analyzing the long-run equilibrium association of capital structure with its determinants.FindingsThe study finds that each manufacturing sector has unique determinants of capital structure. The debt level is significantly affected by asset tangibility, growth opportunity, effective tax rate, non-debt tax shield, cash flow, profitability, firm size, foreign investment, government borrowing, economic growth, and interest rate. All these firm-specific and macroeconomic variables have strong long-run equilibrium relationship with capital structure as a whole.Practical Implication of the StudyThe study analyzes the determinants of capital structure for eight manufacturing sectors of India, which helps firm managers and policy-makers to identify appropriate factors that maximize firm value. The sector-specific features of firms may lead to a new path with regard to corporate governance and ownership structure to enhance stakeholder's satisfaction.Originality/valueThe use of semi-parametric and non-parametric panel regression models to analyze the determinants of capital structure, and the use of panel cointegration approach to explore the long-run equilibrium relationship between the determinants and its factors are the unique contributions of the present research.

The present study investigates the relationship between working capital management and SME profitability. It also analyzes the impact of macroeconomic impulses on firm profitability through efficient management of working capital in the case of Indian small and medium scale enterprises over the time period spanning from 2010 to 2017 using Feasible Generalized Least Square (FGLS) regression models. The study concludes the negative relationship of account receivables together with a positive relationship of inventories and account payables with SME profitability. It implies the firm managers can maximize SME’s profitability by converting the credit sales to cash as early as possible, by increasing the days of accounts payable and following a conservative inventory management strategy. Changes in economic growth and commercial bank advances to small scale industries are the key macroeconomic determinants that are impacting SME profitability. The results from this paper may guide the firm managers to shape their working capital management strategies to maximize profitability. Policymakers may find the study interesting to identify the macroeconomic parameters that significantly influence Indian SMEs.

Purpose The purpose of this paper is to capture the pattern of return volatility and information spillover and the extent of conditional correlation among the stock markets of leading South American economies. It also examines the connectedness of market returns within the region. Design/methodology/approach The time series properties of weekly stock market returns of benchmark indices spanning from the second week of 1995 to the fourth week of December 2015 are analyzed. Using univariate auto-regressive conditional heteroscedastic, generalized auto-regressive conditional heteroscedastic, and dynamic conditional correlation multivariate GARCH model approaches, the study finds evidence of returns and volatility linkages along with the degree of connectedness among the markets. Findings The findings of this study are consistent with increasing market connectedness among a group of leading South American economies. Stocks exhibit relatively fewer asymmetries in conditional correlations in addition to conditional volatility; yet, the asymmetry is relatively less apparent in integrated markets. The results demonstrate that co-movements are higher toward the end of the sample period than in the early phase. The stock markets of Argentina, Brazil, Chile, and Peru are closely and strongly connected within the region followed by Colombia, whereas Venezuela is least connected with the group. Practical implications The implication is that foreign investors may benefit from the reduction of the risk by adding the stocks to their investment portfolio. Originality/value The unique features of the paper include a large sample of national stock returns with updated time series data set that reveals the time series properties and empirical evidence on volatility testing. Unlike other studies, this paper uncovers the relation between the stock markets within the same region facing the same market condition.