Proxy For Profitability Research Articles

The Impact of Financial Ratios, Operational Efficiency and Non-Performing Loan Towards Commercial Bank Profitability

Objective - The objective of this paper is to determine the impact of Capital Adequacy Ratio (CAR), Loan to Deposit Ratio (LDR), Operational Efficiency proxies by Operational Expense to Operating Income Ratio (BOPO)and Non-Performing Loan (NPL) towards bank profitability proxies by Return on Assets (ROA). Methodology/Technique - Purpose samplingis applied to gather samples of the banking sector that was listed on the Indonesia Stock Exchange for the period of 2012 - 2014. Multiple regression analysis was used to analyse data. Findings - The F test result shows that CAR, LDR, BOPO, and NPL simultaneously, have a significant impact towards ROA. This means that the model can be used to predict bank profitability. It is also deduced that Operational Efficiency proxies by Operational Expense to Operating Income Ratio has a significant impact towards banking profitability. Novelty - This paper suggests that banks perform lending selectively and banks maintain the level of non-performing loans to be low in order to manage the risks and to improve their profitability as a means of increasing public confidence level. Type of Paper Empirical Keywords: Capital Adequacy Ratio; Loan to Deposit Ratio; Non-performing Loan; Operating Expense to Operating Income; Return on Assets. JEL Classification: D81, G21.

The Influence of Profitability and Income Tax on Income Smoothing Rankings

Income smoothing is logical and rational action that managers attempt to reduce abnormal variation in earnings using special tools in accounting. The objective of this study is to investigate the influence of profitability and income tax on income smoothing rankings of the companies in basic industry and chemical sectors listed in Indonesia Stock Exchange. Statistical sample of the present study is formed from 45 companies in 2014. ROA is used as the proxy of profitability. In calculating the income smoothing, it is used Tucker-Zarowin (TZ) statistic for five year from the year 2010 to 2014 amounted to 225 firm-years observations. Income smoothing is measured by the negative correlation between the change in discretionary accruals and change in pre-discretionary income. The results from the hypotheses testing indicated that there is a negative and significant relationship between profitability and income smoothing. However, it is also found that there is no significant relationship between variables of income tax and income smoothing.

When bigger is not better: The economics of hunting megafauna and its implications for Plio-Pleistocene hunter-gatherers

Big game acquisition is viewed as pivotal in the evolution of early hominins and is often associated with the emergence of features that are hallmarks of Homo. We explore the energetic justification for the preference for big game under the premise that larger-sized prey is always more efficiently exploited than smaller-sized game. Using quantitative cost/benefit data derived from ethnographic, ethnoarchaeological and historic sources, we show that certain large-sized game (megafauna) are often more expensive to acquire than smaller-sized prey. Comparative analysis shows that African elephants (Loxodonta africana), the largest-sized terrestrial animal, are lower ranked and less efficient to acquire than many smaller-sized animals irrespective of their encounter rates. These data challenge the idea that prey body size can be used as a proxy for profitability and rank in zooarchaeological analyses. Prey profitability, especially for large-sized and costly taxa, is strongly influenced by prey characteristics relative to existing dispatch technology and the range of nonconsumptive benefits associated with hunting certain megafauna. Nonconsumptive rewards associated with these opportunities can only be gained by certain individuals and are not broadly available to everyone. We suggest that the idea of ‘big game’ specialization needs to be reframed in archaeology.

FAKTOR-FAKTOR YANG MEMPENGARUHI PROFITABILITAS PERUSAHAAN PEMBIAYAAN DI INDONESIA

This study aims to determine the factors that infl uence the profi tability of fi nancing company in Indonesia with samples of 6 companies listed in Indonesia Stock Exchange 2007-2012 period that meets the provisions of the Minister of Finance Regulation No. 84/PMK.012/2006 about a company fi nancing. Return on Assets and Return on Equity is used as a proxy for profi tability. Debt to Equity Ratio, Net Receivables Assets, Operating Effi ciency, Size and Growth used as a measure of internal factors and the Gross Domestic Product as macroeconomic factors. The results showed the condition of the fi nancing company experienced a diffi cult situation in making a profi t from the provision of fi nancing receivables. The use of debt and cost effi ciency to provide benefi ts to shareholders, while the company size and growth of assets does not affect profi tability. Macroeconomic factors found to infl uence the profi tability of fi nancing companies. Keywords: Profi tability, Debt to Equity Ratio, Net Receivables Assets, Operating Effi ciency, Gross Domestic Product.

What R&D Assets Say about Firm Profitability

<p>Research and development (R&D) activities are usually considered a key factor for achieving superior performances. Using a sample of 11,897 manufacturing Italian firms, we examine the relationship between R&D expenditure that is capitalized as an intangible asset and some proxies of firm profitability over a period of four years in order to explore whether R&D assets can help investors in the identification of profitable firms. Contrary to expectations, this paper found a negative and/or an insignificant association between R&D assets and proxies of firm profitability. Although there are several possible explanations for this result, what we learn from this study is that R&D assets are not on average a reliable indicator for detecting profitable firms. Research findings revealed that firms with R&D assets appear to be not so profitable, large and levered.</p>

The Effect of Reported Comprehensive Income, Firm Size, Profitability and Leverage on Income Smoothing (A Study on Companies of Consumer Goods in Manufacturing Sector Listed in Indonesia Stock Exchange)

This study aims to examine the influence of profit or loss and other comprehensive income, firm size, profitability of the firm, and firm’s financial leverage on income smoothing conducted by the firm partially. Since 2011, new regulation of financial reporting adopted from IFRS is implemented in Indonesia to change of the income statement into a statement of comprehensive income, then changed again to the statements of profit or loss and other comprehensive income which would apply active in 2015. Therefore, this study will inspect those recent issues. Previous researches show different results regarding to the influences of each variables. Total asset will be used as the proxy of firm size, ROA as the proxy of profitability and financial leverage will be proxied by DAR. The information of statement of comprehensive income is taken from Statement of Comprehensive Income of firm’s Annual Report. Income smoothing conducted by firms can be detected by using Eckel Index. Statistical method used for the research is multiple regression analysis. Using simple linear regression analysis, it can be concluded that: (1) firm size influences the income smoothing behavior; (2) profitability of the firm does not influences the income smoothing behavior; (3) firm’s financial leverage does not influences income smoothing behavior; and (4) statement of comprehensive income influences income smoothing behavior.

A Study on Impact of Leverage ON Profitability: Empirical Evidence from Select Pharmaceutical Companies in India

This empirical study evaluates the relationship between profitability and leverage of selected pharmaceutical companies in India. The study finds that by studying specific industry's leverage, one can ascertain unique attributes, which are usually not apparent in the combined analysis of many sectors. This study has analyzed 30 companies in the pharmaceutical industry, which are selected based on the consistency of the data for the period 2006 – 2015 using statistical tools like Descriptive Statistics, Multiple Correlation and Multiple Regression Analysis. Seven regressors i.e., size, growth rate, long term debt ratio, total debt ratio, tangibility, non-debt tax shield and interest coverage ratio are employed to examine their effects on different profitability indicators such as return on assets, return on equity and earnings per share. The empirical results revealed that independent variables such as, size and total debt ratios have statistically significant relationship with the different proxies of profitability and they determine the profitability to a great extent.

Working Capital Management and Corporate Profitability: Empirical Evidences from Indian Cement Companies

The current study examines the relationship between working capital management strategies of a firm and its profitability. Cash conversion cycle has been utilized as a measure of the working capital management, whereas gross operating profit is used as a proxy for a firm's profitability. 35 Indian cement companies are considered for the study for a period 5 years (2010–2014) which results in 175 total observations. Relevant secondary data for the study were obtained from ACE analyser Database. The objectives of the current study is firstly to identify the relationship between effective working capital management (cash conversion cycle) and profitability (GOP) of the Indian cement companies during the period of study. Secondly, to analyze the effect of different components of cash conversion cycle on the profitability of the Indian cement companies during the period of study. And to conclude the study what extent every variable is influencing the profitability during the study period. The results reveals that cash conversion cycle of a company has a negative correlation with its profitability. Our results also suggest that managers can improve the profitability by decreasing the number of day's receivables and increasing the inventory turnover in days. The finding highlights the importance of efficient working capital management practices to improve the profitability of companies.

The Management of Working Capital and Profitability of SMEs in the Euro Area

Short-term financial management involves the management of current assets and liabilities, which directly affect an organisation’s liquidity and profitability. This study aims to examine the relationship between the operating performance and short-term financial management of small and medium-sized enterprises in Europe. Return on assets is used as a proxy for profitability and the cash conversion cycle is used as a proxy for working capital management. The analysis in this study is based on non-financial firms in 19 euro area countries, over a six-year period from 2008 to 2013. The negative and significant relationship between profitability and each of its determinants, such as average collection period, average payment period, average inventory period, cash conversion cycle and profitability, was found using the GLS and OLS methods. This means that managers may create value for shareholders through shorter collection periods, a guarantee of fast moving inventories and longer payment periods (provided this does not affect their credit risk). In addition, the governance structure of a firm affects how it reacts to external factors and influences its financial performance, for which reason the number of directors variable was included in this study in order to test this relationship. The results indicate that there is an inverse relationship between the number of director and profitability, which can be explained by the fact that a larger board of directors generates communication and decision problems. The positive relationship found between liquidity and profitability can be explained by the fact that firms use first of all the amount generated and accumulated internally before seeking external resources, especially in the case of SMEs, which have difficulties in obtaining external financing.

Efficiency - Profitability Mapping of Shipping and Marine Transportation Companies: Evidence from Indonesia

In supporting the maritime economy as the backbone of Indonesian economy, shipping and marine transportation companies should increase their performances. This research aims to analyze efficiency-profitability mapping of Indonesian shipping and marine transportation companies using efficiency-profitability matrix. This research uses Return on Assets (ROA) as profitability proxy and Data Envelopment Analysis for the measurement of efficiency (overall technical efficiency, pure technical efficiency, and scale efficiency). The results of this research show that not all of the technically efficient shipping and marine transportation companies are scale efficient. This research also finds that not all of the companies that have high profitability are also having high efficiency. Some companies are efficient but still make less profit because they are in the dog quadrant. Some companies are included in the Sleeper quadrant and should improve their management. However, most of the companies are included in the Star quadrant, means that most of the companies have high efficiency and profitability. The results of this research show that it’s important for to the shipping and marine transportation companies to increase their efficiency in order to have higher profitability. DOI: 10.5901/mjss.2015.v6n5s5p230

Market power, efficiency and bank profitability: evidence from Ghana

This study examines the determinants of bank profitability in Ghana within the market power, relative market power and efficient structure frameworks. Using annual data on 26 Ghanaian banks from 2003 to 2011, we employ the Herfindahl Index and concentration ratio as our proxies for market power hypothesis while efficiency scores from the data envelopment analysis is employed as a proxy for the efficient structure hypothesis. The system generalized method of moment is employed to estimate a panel data model with return on assets, return on equity and net interest margin as our proxies for bank profitability. The results of the empirical estimation reject both the market power and relative market power hypotheses in the Ghanaian banking industry. While technical efficiency is found to have a positive relationship with profitability to support the efficient structure hypothesis, a negative relationship between scale efficiency and profitability is reflected by the inability of banks to operate at the optimal scale of operations. We also document evidence on the low persistence of profit which suggests a competitive banking industry. Implications for industry regulation are discussed.

Determinants of Deposit Money Banks' Profitability in Nigeria

Determinants of Deposit Money Banks' Profitability in Nigeria

The Effect of the Liquidity Management on Profitability in the Jordanian Commercial Banks

This research seeks to investigate the effect of the liquidity management on profitability in the Jordanian commercial banks during the time period (2005–2012). Thirteen banks have been chosen to express on the whole Jordanian commercial banks. The liquidity indicators are investment ratio, Quick ratio, capital ratio, net credit facilities/ total assets and liquid assets ratio, while return on equity (ROE) and return on assets (ROA) were the proxies for profitability. Augmented Dickey Fuller (ADF) stationary test model was used to test for a unit root in a time series of the research variables and then testing hypothesis by using regression analysis. The empirical results show that a positive effect of the increase in the quick ratio and the investment ratio of the available funds on the profitability, while there is a negative effect of the capital ratio and the liquid assets ratio on the profitability of the Jordanian commercial banks. The researcher recommends that there is a need for an optimum utilization of the available liquidity in a various aspects of investment in order to increase the banks' profitability, and banks should adopt a general framework of liquidity management to assure sufficient liquidity for executing their operations efficiently, and they should initiate an analytical study of the evolution rates of liquidity and their ability to achieve a balance between sources and uses of funds.

The Determinants of Commercial Bank Profitability in Indonesia

This paper seeks to examine the determinants of bank profitability in Indonesia. The sample used is a panel data of 25 publicly traded Indonesian commercial banks in 2007-2012 period. This research used Return on Assets (ROA) and Return on Equity (ROE) as proxies of profitability and analyze how variables from three categories that is internal, external, and market share variable affects them. We found some intriguing findings from this study, namely, the effect of CAR that we found to be negative towards profitability, which indicated that the capitals of Indonesian banks are beyond their optimal level. Then we found that Loan to Deposit ratio and Market Share of Credit, contrary to common sense, also demonstrated a negative effect, which appears to be caused by the 2008-2010 Global Financial Crisis. Last, we also found that Inflation positively affect profitability, which seemingly caused by a demand-pull type of inflation.

Determinan Profitabilitas Perbankan Nasional di Indonesia

This research aims to analyze the effect of Capital Adequacy Ratio (CAR), Non-Performing Loans (NPL), Operating Expenses to Operating Income (BOPO), Loan to Deposit Ratio (LDR), Net Interest Margin (NIM) on the profitability proxy with return on assets (ROA) at commercial banks listed on the Indonesia Stock Exchange from 2005 to 2010. The samples used are 14 commercial banks listed on the Indonesia Stock Exchange. The samples are taken using purposive sampling method with certain criteria. The method used in this study is to use multiple regression analysis to test the hypothesis that the t test and the f test. Before using a multiple regression analysis, performed the classic assumption test first.
 The results obtain in this study are simultaneously CAR, NPL, BOPO, LDR, and NIM effect on profitability by 44%. While partially CAR, BOPO, and NIM effect on profitability and LDR NPL does not affect profitability.

Cost of Debt and Corporate Profitability

This paper examines the relationship between the cost of debt and corporate profitability using a sample of 3,556 Italian unlisted firms between 2007 and 2011. On the basis of the logistic regression model, we find that the cost of debt, measured by the interest expense to financial debt ratio, is negatively correlated to various proxies of firm profitability. These findings are consistent with previous research on the relevance of indirect costs of corporate distress. However, although the analysis found evidence that unprofitable firms are highly leveraged in accordance with the Pecking order theory, we also observed that the cost of debt for the firms included in the sample is inversely dependent on the amount of financial debt.

The Profitability Premium in Real Estate Investment Trusts

Traditionally, we have assessed firm success relative to a two factor model using say size and a book-to-market ratio. However, recently Novy-Marx (2013) suggests that these measures may simple be a proxy for profitability in firms. The argument is that traditional profitability measures can be manipulated by management and thus cloud the relationship between measured profits and firm success. However, a cleaner measure of profitability better predicts performance than does size and book-to-market. Thus, the traditional empirical factors are replaced with a stronger theoretically predictive variable. Also, in that context at least for REITs, size and book-to-market lose their explanatory power.

The effects of corporate social responsibility activity disclosure on corporate profitability: Empirical evidence from Nigerian commercial banks

The study examined the effects of corporate social responsibility activity(CSR) disclosure on bank profitability in Nigeria. Data were sourced from annual report and accounts of twelve sampled commercial banks in Nigeria for the year 2012 only. Variables such as CSR disclosure scores, banks' size and owners' equity serve as independent variables and banks' profitability proxy by returns on equity(ROE) as dependent variable were incorporated into the model. The data were analyzed using multiple regression analysis of Ordinary Least Square(OLS). The results showed that banks' size and CSR disclosure score have a positive relationship with bank profitability while owners 'equity has negative association with bank profitability. It was therefore concluded that banks should increase their level of CSR disclosure as itexhibits greater concern to improve on good corporate image and as a way of showing a greater commitment to impact and improve people's lives which in return capable of improving banks' patronage and profitability. Keywords: Corporate social responsibility, bank's size, profitability, regression analysis.

Determinantes da rentabilidade bancária no Brasil

Banking profitability has been a theme of study in many countries. In Brazil, research on this area has been concentrated in studying banking spread, usually testing economic variables as drivers. The present study has the aim of finding the determinants of bank profitability in Brazil, measured by return on assets (ROA) and return on equity (ROE) by testing economic, accounting and operating factors as explanatory variables. Using a sample with the 50 largest banks and considering the data referring to end-of-semester financial statements from December 2000 to December 2009, we test nine research hypotheses. The results, estimated in panel data by the method of GMM show that bank profitability is not entirely contemporaneous since it presents inertial behavior (relationship with its lagged value) and also a statistically positive and relevant relationship with the economy’s basic interest rate, with the level of economic activity, with the level of tax burden, with the institutions’ operating efficiency, and with the relative participation of domestic banks as expected. We also found a negative relationship with changes in the exchange rate, which diverges from the a priori expectations. Additionally, we show that bank profitability holds a relationship with the level of inflation, which is positive or negative depending on the model utilized. However, we could not find relevant relationships between bank profitability and the level of compulsory deposits and cash holdings, neither with the relative participation of state-owned versus privately-owned banking institutions. The results obtained with ROE or ROA as alternative proxies for profitability are virtually equivalent, which gives robustness to the outcomes.Key words: banks, profitability, financial institutions, ROA, ROE.

Does customer satisfaction increase firm performance? An application of American Customer Satisfaction Index (ACSI)

As a prominent factor in firms’ profitability and value, customer satisfaction has been given much attention in the measurement of a firm's financial performance. In the hospitality and tourism industry, however, the effect of customer satisfaction on financial performance has been relatively neglected because of the unique characteristics of the industry and presumably increasing cost for uncertain outcomes. Based upon this realization, this study empirically examines the relationship between the customer satisfaction index (CSI) and the companies’ financial performance in the hospitality and tourism industry (i.e., hotels, restaurants, and airlines). Findings reveal that the impact of customer satisfaction is reflected in the profit margin (PM), return on assets (ROA), return on equity (ROE), proxies of a firm's profitability, and in the market value added (MVA), a proxy of firm value. The results indicate that customer satisfaction positively affect a firm's profitability and value in the hospitality and tourism industry. Implications and suggestions for future research are discussed.