The Influence of Profitability Ratios and Company Size on Profitability and Investment Risk in the Capital Market

Rutkowska-Ziarko, Anna

doi:10.1515/foli-2015-0025

Cited by 13 publications

(10 citation statements)

References 4 publications

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“…This paper is an extension of research previously presented by Rutkowska--Ziarko (2015), which concluded that the total risk, defined as variability and semi-variability of the stock prices, is affected by the changeability of profit earned by the company. The aim of this paper is to propose a method for calculating downside accounting betas.…”

Section: Introductionmentioning

confidence: 67%

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The development of downside accounting beta as a measure of risk

Rutkowska-Ziarko¹,

Pyke²

2017

EBR

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This paper develops a new method for measuring market risk called downside accounting beta (DAB). To test the validity of DAB the method is applied to the financial data for 14 food companies listed on the Warsaw Stock Exchange during a 6-year period. DAB calculates how changes in the profitability of the whole sector affects the profitability of a given company. The paper concludes that when calculating DAB using Return on Assets (ROA) and Return on Equity (ROE) there is a positive correlation with market betas. The practical implication of this research is that investors, owners and managers can use DAB to calculate the systematic risk of companies not listed on stock markets and consequently to identify the levels of risk associated with companies within the sector.

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Section: Introductionmentioning

confidence: 67%

“…One of the solutions is to use the average level of a financial ratio in each sector as the target point. The same approach has been proposed for calculating semivariance of profitability ratios in work by Rutkowska-Ziarko (2015).…”

Section: Market Beta Accounting Beta and Downside Riskmentioning

confidence: 99%

The development of downside accounting beta as a measure of risk

Rutkowska-Ziarko¹,

Pyke²

2017

EBR

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“…R-square is the highest for mean ROE, it equals 23% for individual securities and 59% for the portfolio. In prior studies, a positive correlation between the profitability ratios and the quarterly average rates of return was observed for Polish food and con-Pobrane z czasopisma Annales H -Oeconomia http://oeconomia.annales.umcs.pl Data: 03/11/2020 06:44:36 U M C S struction companies (Rutkowska-Ziarko, 2015;Rutkowska-Ziarko & Pyke, 2018). Konchitichi, Luo, Ma, and Wu (2016) found a negative risk premium for ROA and positive risk premium for .…”

Section: 416mentioning

confidence: 93%

Market and Accounting Risk Factors of Asset Pricing in the Classical and Downside Approaches

Rutkowska-Ziarko

Markowski

2020

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Theoretical background: The variability of the company’s profitability is the result of the accompanying risk. To compare the profitability of many companies, relative profitability measures, which include profitability ratios, are more convenient. This article analyses market and accounting risk factors of CAPM. Risk was considered in variance and downside framework. Market betas, accounting betas were used in an extended version of the asset pricing model. Additionally, the influence of profitability ratios, such as ROA and ROE on the average rate of return on the capital market are considered.Purpose of the article: The main purpose of this study is to test the standard and extended CAPM relations between systematic risk measures and mean returns for single companies quoted on the Polish capital market and equally-weighted portfolios in two approaches: variance and downside risk.Research methods: The research based on individual securities and portfolios, compares the one-factor risk-return relationships with two-factor ones estimated using mean returns in cross-sectional regressions. The regressors were expressed in absolute terms and classical and downside beta coefficients. The sample includes companies differing in terms of size and across different industries.Main findings: Portfolios with higher classical or downside market betas generate higher mean returns. The negative risk premium for accounting betas for variance and downside risk was identified. It is not in accordance with our earlier study of the Polish construction sector, where a positive and significant risk premium for downside accounting betas was found. The highest explanatory power of rates on returns on the Polish capital market were found for average ROA and ROE. This confirms the results of the previous studies on the Polish capital market for food and construction sectors.

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“…For this reason, profitability analysis is very important for the company and becomes the concern of shareholders who invest in the company. Company profitability can be measured by determining financial profitability ratios (Rutkowska-Ziarko, 2018). The improvement in profits due to the high profitability ratio of a company can attract investors and increase the company's stock price (Satryo et al, 2017).…”

Section: Profitabilitymentioning

confidence: 99%

Informasi Keuangan Dengan Moderasi Ukuran Perusahaan Pada Harga Saham Emiten Lq45

Sumarna

Agustini

2022

j. akunt.

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The stock price is an important factor and must be considered by investors because stock price shows the performance of the company. The stock price also shows the value of a company and is an appropriate index for the effectiveness of the company. Companies that included on category LQ45 (Liquid 45) are the fourty-five dominate listed companies in the Indonesia Stock Exchange. LQ45’s stock price is relatively stable compared to the other companies, even during the current pandemic. This study aims to find empirical evidence regarding the factors that influence and moderate the stock price of LQ45. The independent variables were Price Book Value (PBV), Price Earnings Ratio (PER), profitability proxied by Net Profit Margin (NPM), Debt Equity Ratio (DER) and firm size as moderating variable. This quantitative research uses purposive sampling technique and EViews 9 for data processing. This study examines the partial influence (t-test), simultaneous influence (F-test), and moderating interaction (Moderated Regression Analysis/ MRA). The results of the partial test found that PBV, PER, NPM had some significant influence and DER had an insignificant influence to stock price. For simultaneous result, all independent variables have a significant influence on the stock price. Meanwhile, the results of the MRA found that firm size did not moderate (not a moderating variable) for the influence of the independent variables to the stock price.

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The Influence of Profitability Ratios and Company Size on Profitability and Investment Risk in the Capital Market

Cited by 13 publications

References 4 publications

The development of downside accounting beta as a measure of risk

The development of downside accounting beta as a measure of risk

Market and Accounting Risk Factors of Asset Pricing in the Classical and Downside Approaches

Informasi Keuangan Dengan Moderasi Ukuran Perusahaan Pada Harga Saham Emiten Lq45

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