Abstract
This paper examines the impacts of firm-specific and macroeconomic factors in determining the profitability of the cement industry in Bangladesh. This study took stock exchange listed all cement companies of Bangladesh as samples and covered the period of 2000–2018. Return on Assets (ROA) was chosen as the dependent variable and firm size, expense to revenue ratio, leverage, age, inflation rate, GDP growth rate, and real interest rate were chosen as independent variables where the first four are firm-specific and the other three are macroeconomic factors. This study considered ROA as the profitability measurement of the firms. The study found that leverage, GDP growth rate, and real interest rate have significant impacts on the profitability. Firm size, age, GDP growth rate, and real interest rate have a positive impact whereas expenses to revenue ratio, leverage, and inflation have a negative impact on the profitability of the firms under the cement industry.
Highlights
Cement industry is said to have a fundamental contribution to the infrastructural development of any country
This paper thoroughly studied the effects of firm-specific and macroeconomic factors on the profitability of the cement industry in Bangladesh
For macroeconomic variables; we have found that Return on Assets (ROA) is influenced by real interest rate and GDP growth rate positively and by inflation negatively
Summary
Cement industry is said to have a fundamental contribution to the infrastructural development of any country. Pratheepan (2014) mentioned that, for an export-oriented country, determinants of profitability are the essential elements for economic survival He discovered a significant positive relationship between firm size and profitability and a negative relationship with leverage but that was not statistically significant in his study of Sri Lankan manufacturing companies. The study by Prempeh, Sekyere, and Amponsah Addy (2018) on the manufacturing firms of the said country stated that leverage and interest rates have a negative relationship with profitability while liquidity and firm size have a significantly positive relationship with profitability. Certain factors affect the profitability of manufacturing companies of Bangladesh in particular, such as the size of the firm, the expense to revenue ratio, maintaining leverage in capital structure, and learning effect over the age of business operations as firm-specific factors and inflation, GDP growth rate, and real interest rate as macroeconomic factors. Firm-specific data were collected from the annual reports of the companies
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