European Journal of Business Science and Technology 2016, 2(1):43-52 | DOI: 10.11118/ejobsat.v2i1.54

Determinants of Return on Equity for a Sustainable Growth of the Manufacturing Industry in the Czech Republic

Daniel Anarfi1, Kofi Ampadu Boateng1, Kwabena Adu Ababio2
1 Mendel University in Brno, Czech Republic
2 University of Ghana, Accra, Ghana

The aim of this study was to examine the factors that determine return on equity (ROE) in the Manufacturing industry in the Czech Republic over a 10-year period of 2005 to 2014. The study combined firm level variables (DuPont model) and macroeconomic variables (Multifactor Arbitrate Pricing Theory - APT) to regress data obtained from Amadeus (Bureau van Dijk) and the World Bank respectively. The results show that profit margin and net asset turnover have a positive and significant effect on ROE. However, financial leverage had a negative and significant impact on ROE. With regard to macroeconomic variables, none of them affected ROE positively. GDP growth and Interest rate impacted negatively on ROE whilst unemployment, inflation and exchange rate do not have any impact on ROE. These results suggest that the firms can improve their ROE by developing cost leadership strategies and increasing sales revenue.

Keywords: return on equity, company performance, manufacturing industry, Czech Republic
JEL classification: G32, G39

Published: November 1, 2016  Show citation

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Anarfi, D., Boateng, K.A., & Ababio, K.A. (2016). Determinants of Return on Equity for a Sustainable Growth of the Manufacturing Industry in the Czech Republic. European Journal of Business Science and Technology, 2(1), 43-52. doi: 10.11118/ejobsat.v2i1.54
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