Abstract
The study examines the macroeconomic variables impact on financial performance, using the financial statement of listed companies in Automobile sector of Pakistan stock exchange. The study covered the period from 2007 to 2016. Before applying the GMM model the preliminary test was done. Firm performance is measured with three ratios i.e., return on assets (ROA), return on equity (ROE) and gross profit margin ratio (GPM). The results revealed that the selected macroeconomics variables have the negative relationship with return on equity, return on assets and gross profit margin and the inflation has positive relation with return on equity and negative relation with return on assets (ROA) and gross profit margin (GPM).
Highlights
Firm is an organization that combines and organize resources for producing goods and services to sell in the market to its customer to earn profit
The value of Rsquare shows the total variation in the dependent variable such as gross profit margin is caused by the selected macroeconomics variables as macroeconomic variables such as “the interest rate, the inflation rate, the exchange rate and the gross domestic product (GDP) growth rate”
The result derived by the analysis of return on assets and selected macroeconomics variables shows that, the inflation rate has negative & insignificant relationship with the return on assets and the interest rate, the exchange rate and the GDP growth rate have negative and significant relationship with the return on assets
Summary
Firm is an organization that combines and organize resources for producing goods and services to sell in the market to its customer to earn profit. The ultimate objective of firm is to maximize its value and increase their profit. Better financial performance is the way of satisfying its investors. This indicates the company’s trend that is either improving or declining. The financial performance is judged by profitability, firm size, and maximization of market value, employee satisfaction, customer’s satisfaction, environmental performance and social performance. Macroeconomic is the study of behavior of whole economy not individuals. There are some macroeconomics variables that have an impact on all those companies which exist in a specific economy. There are more than 30 macroeconomics variables that influence firm performance, some of them directly impacts firms and some indirectly influence the performance
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