Determinants of Profitability: Evidence from Power and Energy Sector

Abstract

The study examines the impact of key determinants of profitability of power and energy sector in Pakistan such as firm size, firm age, firm growth, productivity, financial leverage and electricity crisis discussed in the broader inter-disciplinary literature. For this purpose panel data of 16 firms of power and energy sector is taken for 2001 to 2012. The study considers profitability determinants at the firm as well as industry affiliation levels in examining hypotheses developed from resource-based approaches. Random effect model is used to detect the combination of variables that best estimated the impact of the explanatory variables on the dependent variable. The empirical results suggest that firm size, firm growth, and electricity crisis positively impact the profitability. However, firm age, financial leverage and productivity negatively influence the firm profitability. This study also propose that during the electricity crisis the profitability of power sector is increased even production of this sector is very low. The findings further indicate that larger and younger firms with high growth and low productivity are more likely to be profitable. This study has found that firm productivity and firm size are the strongest determinants of profitability in power and energy sector of Pakistan.

Effect of Working Capital Management on the Profitability of Steel Companies on Vietnam Stock Exchanges

“…Therefore, the consideration of the factors affecting profitability to propose, recommend and find effective and suitable solutions to improve profitability has been mentioned in many research. It is easy to find studies on factors that directly affect profitability such as financial leverage, solvency, liquidity, firm size, capital structure and working capital management (Chamberlain, 1962;DeAngelo & Masulis, 1980;Bradley, Jarrell, & Kim, 1984;Capon, Farley, & Hoenig, 1990;Miao, 2005;Huang & Song, 2006;Aburime, 2009;Anbar & Alper, 2011;Fareed, Ali, Shahzad, Nazir, & Ullah, 2016;Muhammad, Rehman, & Waqas, 2016;Szymańska, 2017;Grau, & Reig, 2018;Blažková, 2018;Yüksel, Mukhtarov, Mammadov, & Özsarı, 2018;Qayyum & Noreen, 2019;Vu, Do, Dang, & Nguyen, 2019;Zheng, Liu, & Huang, 2019;Nguyen & Nguyen, 2020) or external factors influencing profitability such as market concentration, industry growth, import growth, GDP growth, inflation, and profitability. yield and profit on financial markets (Bei & Wijewardana, 2012;Pattitoni, Petracci & Spisni, 2014;Çelik, Bilen, & Bilen, 2016;Jędrzejczak-Gas, 2017;Grau & Reig, 2018;Soukhakian & Khodakarami, 2019).…”

Determinants of Profitability: A Study on Manufacturing Companies Listed on the Dhaka Stock Exchange

“…Return on assets (ROA) is an indicator of how efficiently and effectively a company utilizes its assets to generate revenue. Fareed, Ali, Shahzad, Nazir, and Ullah (2016) concluded that return on assets is a proxy of profitability and return on equity (ROE) is a measure of the profitability of a company on the basis of equity.…”

Determinants of Profitability: Evidence from Brokerage Companies Listed at Amman Stock Exchange

“…According to the study of Matar and Eneizan (2018) which was applied on industrial companies in Jordan, the variables of liquidity, profitability, and revenues are positively related with the Return on Assets (ROA), while the variables of leverage and firm size are negatively related with it. The empirical results of the study of Fareed et al (2016) suggest that firm size, firm growth, and electricity crisis positively impact the profitability. However, firm age, financial leverage and productivity negatively influence the firm profitability.…”