Determinants of Corporate Profitability in Developing Economies

Abstract

The study investigates the determinants of corporate profitability in developing economies, with main emphasis on the Nigerian context. The study analyzes the relationship between capital structure, firm size, cash liquidity, financial leverage and corporate profitability. A panel data consisting of forty (40) randomly selected companies, spanning a period of five (5) years was utilized for the study. The ordinary least square regression was used to analyze the existence of relationships among the dependent and independent variables. A positive relationship was found to exist between firm size and corporate profitability, and financial leverage and corporate profitability. Capital structure and cash liquidity exhibited negative relationships with corporate profitability. The study recommended the use of different indices of profitability; as differing results are possible. The study further proposed the inclusion of additional variables in order to improve the stability and explanatory power of the overall model.

Keywords: Corporate Profitability, Capital Structure, Firm Size, Cash Liquidity, Financial Leverage.