Investigating the Determinant of Return on Assets and Return on Equity and Its Industry Wise Effects in TSE (Tehran Security Exchange Market)

Abstract

The  purpose of this study  is to find out that from the components of Dupont identity of  Return on Equity which one is most consistent or volatile among profit margin, total assets turnover and equity multiplier in Fuel and Energy Sector, Chemicals Sector, Cement Sector, Engineering Sector, Textiles Sector and Transport and Communication Sector of TSE 100 index. The purpose of the study was served by taking data from 2004 to 2012 of 51 companies (falling under six mentioned industries) of TSE 100 as Paradigm of Panel Data. The F-Statistics of One Way ANOVA (Analysis of Variance) show that it is Assets Turnover which significantly varies from industry to industry whereas Equity Multiplier and Profit Margin are not much volatile among indifferent industries. Moreover, Adjusted R Square in Panel OLS Analysis has confirmed Industry  Effect on Newly established firms from Fuel and Energy Sector, Cement Sector and Transport and Communication Sector whereas others Sectors such as Chemicals Sector, Engineering Sectors and Textiles Sectors does not have that leverage.

Keywords: Profitability, Dupont Identity, Panel Least Square

JEL Classification: G12, G39, C23