Responsibility Accounting and Profitability of Listed Companies in Pakistan Stock Exchange

Abstract

Business operations requires well-structured activities into firm different departments and best utilization of capitals in small or large size firms was sole objective to meet the expectation of profit and preference of investors. To meet these expectations of investors was a challenge for firm managers as shown by many early studies. The objective of this study was to analyses the impact of responsibility accounting on firm profitability measurement proxies of listed firms the in the Pakistan stock exchange. Ex-post facto design of research was take on. Study utilized the cost of sale, operating cost, quick ratio, cash conversion cycle as a responsibility accounting variables using firm size as control and proxies used for profitability were earnings per share, profit before tax, return on assets and return on equity. To test the study hypothesis, all listed firms in the PSX till 30th June 2021 was considered for population of the study. Study used a sample of all 38 sectors top listed companies using purposive and stratified sampling technique using data from the period 2011 to 2021. Study data were taken out from listed firms annual reports published on their website and also taken from PSX website after auditor’s scrutiny reports. Descriptive and inferential statistics were used to test the study data. Study used panel least square techniques fixed or random effect model. Study results of Hausman test favours of random effect model. So study reports the result of random effect model. Findings of the study shows that responsibility accounting (RA) variables affect significantly on profit before tax as P value is less than 0.05 of the listed firm in PSX during the period. Study also revealed that cash conversion cycle and firm size has insignificant association with PBT. Results also shows that F-Stat=3.469, AdjR2=.0.145, p=0.000. Study results with earnings per share and return on assets shows that a non-significant behavior with and without control variable. There is a significant difference in the result of EPS as well as return on assets with and without the control variable of firm size. Findings of the study of responsibility accounting have significant association on return on equity while non-significant effect on return using firm size as control variable. Results of the study also shows the behavior of cost of sale, operating costs, firm quick ratio, cash conversion cycle and firm size has either positive or negative relationship with profitability measurement proxies of listed firm. depends on different conclusion of the study shows that profitability proxies has affected by responsibility accounting of listed firm in Pakistan stock exchange in Pakistan. Based on the findings and conclusion, managers of the listed firm must focus more on measuring the profitability in such a way complete understanding of responsibility accounting. They must make sure to assign proper task handing over with clear objective, proper process of appraisal, proper budgeting of the achievable investment, develop team cross functional tasks as well as system of proper reward which create profit for the firm to achieve goal of owners.