Corporate Profitability:Investigation of KSE-100 Index Pakistan

Abstract

The current study is aimed to investigate the relationship between macro-economic and micro-economic variables with firm’s profitability at Karachi stock Exchange. Macro-economic variables are measured by using proxies of Inflation rate and per capita income. While, micro-economic variables are measured by using proxies of corporate governance, capital structure, risk management, firm maturity, market valuation of companies and working capital management. The measurement proxies of such variables are mentioned in methodological section. The data is acquired from KSE.100 index within the range from 2005 to 2014 that consists on ten years. And connivance sampling technique is used. The nature of study is panel. Thus, Correlation tests and Hausman’s test – Fixed effect model test are implied on study data. The study presented significant results as like prior investigations except hypothesis if inflation rate and Quick acid ratio of working capital management. Thus, one hypothesis from macro-economic variables and none hypothesis from micro-economic variables are rejected.

Keywords: Governance, Capital Structure, Risk Management, Firm Maturity, Tobin’s q. Panel Data, Hausman’s test.