IDEAS home Printed from https://ideas.repec.org/a/ids/ijepee/v13y2020i2p152-172.html
   My bibliography  Save this article

Factors affecting financial performance of Indian firms: an empirical investigation of firms listed on Bombay Stock Exchange

Author

Listed:
  • Mosab I. Tabash
  • Eissa A. Al-Homaidi
  • Anwar Ahmad
  • Najib H.S. Farhan

Abstract

The aim of this study is to examine the factors that influence the financial performance of Indian listed companies during the period ranging from 2010 to 2016. The sample size consists of 1598 companies listed in Mumbai Stock Exchange (MSE) in India. Return on assets (ROA), return on equity (ROE), profit after tax (PAT) and earning per share (EPS) are used as proxies for financial performance of Indian firms. The fixed effects regression model results revealed that the leverage ratio, liquidity ratio, size of company and company age have a significant and positive influence on the financial performance of Indian listed companies. The leverage ratio has a positive impact on return on equity (ROE) and negative effect on return on assets (ROA), profit after tax (PAT), and earning per share (EPS). The study recommended that managers should consider the leverage ratio in such a way that improves firms' financial performance. The current study provides useful insights for managers, analysts, regulators, investors, and other interested parties in the performance of Indian listed firms.

Suggested Citation

  • Mosab I. Tabash & Eissa A. Al-Homaidi & Anwar Ahmad & Najib H.S. Farhan, 2020. "Factors affecting financial performance of Indian firms: an empirical investigation of firms listed on Bombay Stock Exchange," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 13(2), pages 152-172.
    • Handle: RePEc:ids:ijepee:v:13:y:2020:i:2:p:152-172
    as

    Download full text from publisher

    File URL: http://www.inderscience.com/link.php?id=107928
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Abdul Rashid & Sana Jabeen, 2016. "Analyzing performance determinants: Conventional versus Islamic Banks in Pakistan," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 16(2), pages 92-107, June.
    2. Olumide A. Olowokure & Muhammad Tanko & Terzungwe Nyor, 2016. "Firm Structural Characteristics and Financial Reporting Quality of Listed Deposit Money Banks in Nigeria," International Business Research, Canadian Center of Science and Education, vol. 9(1), pages 106-122, January.
    3. Athanasoglou, Panayiotis P. & Brissimis, Sophocles N. & Delis, Matthaios D., 2008. "Bank-specific, industry-specific and macroeconomic determinants of bank profitability," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(2), pages 121-136, April.
    4. Tabash, Mosab I., 2018. "An empirical investigation between liquidity and key financial ratios of Islamic banks of United Arab Emirates (UAE)," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 14(3), May.
    5. Saibal Ghosh, 2006. "Do board characteristics affect corporate performance? Firm-level evidence for India," Applied Economics Letters, Taylor & Francis Journals, vol. 13(7), pages 435-443.
    6. Duong Thuy Nguyen & Huyen Thanh Ta & Huong Thi Diem Nguyen, 2018. "What Determines the Profitability of Vietnam Commercial Banks?," International Business Research, Canadian Center of Science and Education, vol. 11(2), pages 231-245, February.
    7. Trad, Naama & Trabelsi, Mohamed Ali & Goux, Jean François, 2017. "Risk And Profi Tability Of Islamic Banks: A Religious Deception Or An Alternative Solution?," European Research on Management and Business Economics (ERMBE), Academia Europea de Dirección y Economía de la Empresa (AEDEM), vol. 23(1), pages 40-45.
    8. Elisa Menicucci & Guido Paolucci, 2016. "The determinants of bank profitability: empirical evidence from European banking sector," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 14(1), pages 86-115, July.
    9. Rajshree Agarwal & Michael Gort, 2002. "Firm and Product Life Cycles and Firm Survival," American Economic Review, American Economic Association, vol. 92(2), pages 184-190, May.
    10. Sareeya Wichitsathian, 2019. "Working capital management and its impacts on profitability: the case of small and medium food enterprises in Nakhon Ratchasima, Thailand," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 12(2), pages 113-120.
    11. Ali Uyar, 2009. "An analysis of graphic disclosure in annual reports: the case of Turkey," Managerial Auditing Journal, Emerald Group Publishing, vol. 24(5), pages 423-444, May.
    12. Naama Trad & Mohamed Ali Trabelsi & Jean-François Goux, 2017. "Risk and profitability of Islamic banks: A religious deception or an alternative solution?," Post-Print halshs-01421357, HAL.
    13. Ozili, Peterson K & Uadiale, Olayinka, 2017. "Ownership Concentration and Bank Profitability," MPRA Paper 102571, University Library of Munich, Germany.
    14. Aivazian, Varouj A. & Ge, Ying & Qiu, Jiaping, 2005. "The impact of leverage on firm investment: Canadian evidence," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 277-291, March.
    15. Eissa A. Al‐Homaidi & Mosab I. Tabash & Najib H. Farhan & Faozi A. Almaqtari, 2019. "The determinants of liquidity of Indian listed commercial banks: A panel data approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1616521-161, January.
    16. Ana-Maria Burca & Ghiorghe Batrinca, 2014. "The Determinants of Financial Performance in the Romanian Insurance Market," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(1), pages 299-308, January.
    17. Mosab Tabash, 2018. "An empirical investigation between liquidity and key financial ratios of Islamic banks of United Arab Emirates (UAE)," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(3), pages 713-724, June.
    18. Achsania Ruziqa, 2013. "The impact of credit and liquidity risk on bank financial performance: the case of Indonesian Conventional Bank with total asset above 10 trillion Rupiah," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 6(2), pages 93-106.
    19. Dietrich, Andreas & Wanzenried, Gabrielle, 2014. "The determinants of commercial banking profitability in low-, middle-, and high-income countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(3), pages 337-354.
    20. de Mendonça, Helder Ferreira & Silva, Rafael Bernardo da, 2018. "Effect of banking and macroeconomic variables on systemic risk: An application of ΔCOVAR for an emerging economy," The North American Journal of Economics and Finance, Elsevier, vol. 43(C), pages 141-157.
    21. Olson, Dennis & Zoubi, Taisier, 2017. "Convergence in bank performance for commercial and Islamic banks during and after the Global Financial Crisis," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 71-87.
    22. Deitiana, Tita & Habibuw, Lionel Greg, 2015. "Factors Affecting the Financial Performance of Property Andreal Estate Companies Listed at Indonesia Stock Exchange," Asian Business Review, Asian Business Consortium, vol. 5(2), pages 79-88.
    23. Renbao Chen & Kie Ann Wong, 2004. "The Determinants of Financial Health of Asian Insurance Companies," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(3), pages 469-499, September.
    24. Vincent Okoth Ongore & Gemechu Berhanu Kusa, 2013. "Determinants of Financial Performance of Commercial Banks in Kenya," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 237-252.
    25. Sehrish Gul & Faiza Irshad & Khalid Zaman, 2011. "Factors Affecting Bank Profitability in Pakistan," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(39), pages 61-87, March.
    26. Abbas, Qamar & Hunjra, Ahmed Imran & Azam, Rauf I & Ijaz, Muhammad Shahzad & Zahid, Maliha, 2014. "Financial performance of banks in Pakistan after Merger and Acquisition," MPRA Paper 60790, University Library of Munich, Germany.
    27. Song l KAK LL ACARAVCI & Ahmet Ertugrul ALIM, 2013. "Turkish Banking Sector's Profitability Factors," International Journal of Economics and Financial Issues, Econjournals, vol. 3(1), pages 27-41.
    28. N.R. Bhanumurthy & Prakash Singh, 2013. "Financial sector development and economic growth in Indian states," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 6(1), pages 47-63.
    29. Eissa A. Al-Homaidi & Mosab I. Tabash & Najib H. S. Farhan & Faozi A. Almaqtari, 2018. "Bank-specific and macro-economic determinants of profitability of Indian commercial banks: A panel data approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1548072-154, January.
    30. Ali Abbas & Zahid Bashir & Shahid Manzoor & Muhammad Nadeem Akram, 2013. "Determinants of Firm¡¯s Financial Performance: An Empirical Study on Textile Sector of Pakistan," Business and Economic Research, Macrothink Institute, vol. 3(2), pages 76-86, December.
    31. Jonas Oliveira & Lúcia Lima Rodrigues & Russell Craig, 2011. "Risk-related disclosures by non-finance companies: Portuguese practices and disclosure characteristics," Managerial Auditing Journal, Emerald Group Publishing, vol. 26(9), pages 817-839, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Md. Habibur Rahman & Krishna Shaha, 2023. "Impact of Fundamental and Macroeconomic Factors on Stock Returns: A Study on Cement Industry in Bangladesh," International Journal of Science and Business, IJSAB International, vol. 28(1), pages 41-66.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eissa A. Al-Homaidi & Najib H.S. Farhan & Waleed M. Alahdal & Amgad S.D. Khaled & Moatasem M. Qaid, 2021. "Factors affecting the profitability of Indian listed firms: a panel data approach," International Journal of Business Excellence, Inderscience Enterprises Ltd, vol. 23(1), pages 1-17.
    2. Eissa A. Al-Homaidi & Mosab I. Tabash & Anwar Ahmad & David McMillan, 2020. "The profitability of islamic banks and voluntary disclosure: empirical insights from Yemen," Cogent Economics & Finance, Taylor & Francis Journals, vol. 8(1), pages 1778406-177, January.
    3. Taslima Akther & Mushfiqur Rahman & Md. Mufidur Rahman, 2023. "Factors influencing commercial bank profitability in Bangladesh: a panel data approach," Future Business Journal, Springer, vol. 9(1), pages 1-20, December.
    4. Eissa A. Al-Homaidi & Mosab I. Tabash & Najib H. S. Farhan & Faozi A. Almaqtari, 2018. "Bank-specific and macro-economic determinants of profitability of Indian commercial banks: A panel data approach," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1548072-154, January.
    5. Davis, E Philip & Ali Abdilahi, Ridwa, 2022. "Econometric Analysis of the Determinants of Bank Profitability in Three Major African Counties: Kenya, Nigeria and South Africa," National Institute of Economic and Social Research (NIESR) Discussion Papers 536, National Institute of Economic and Social Research.
    6. Salma Zaiane & Fatma Ben Moussa, 2021. "What Drives Banking Profitability During Financial Crisis and Political Turmoil? Evidence from the MENA Region," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 13(3), pages 380-407, September.
    7. Sreemanta Sarkar & Debdas Rakshit, 2023. "Factors Influencing the Performance of Commercial Banks: A Dynamic Panel Study on India," FIIB Business Review, , vol. 12(1), pages 85-99, March.
    8. Nawal Hussein Abbas Elhussein & Osama Eltayeb Elfaki Osman, 2019. "Exchange Rate fluctuations and Financial Performance of Banks: Evidence from Sudan," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(12), pages 1-15, December.
    9. Sanni Mubaraq & Salami Abdulai Agbaje & Uthman Ahmad Bukola, 2020. "Determinants of Bank Performance in Nigeria: Do they Behave Differently with Risk-Adjusted Returns?," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 30(3), pages 1-34, September.
    10. Maria Elisabete Duarte Neves & Maria Do Castelo Gouveia & Catarina Alexandra Neves Proença, 2020. "European Bank’s Performance and Efficiency," JRFM, MDPI, vol. 13(4), pages 1-17, April.
    11. Prabhas Kumar Rath, 2023. "Nexus Between Indian Financial Markets and Macro-economic Shocks: A VAR Approach," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(1), pages 131-164, March.
    12. Leandro Coghi Bernardelli & Carlos Enrique Carrasco-Gutierrez, 2024. "Macroeconomic, industry-specific and bank-specific determinants of the profitability of Brazilian banks: dynamic panel evidence," Empirical Economics, Springer, vol. 67(2), pages 693-726, August.
    13. Wang, Xiaoying & Sadiq, Ramla & Khan, Tahseen Mohsan & Wang, Rong, 2021. "Industry 4.0 and intellectual capital in the age of FinTech," Technological Forecasting and Social Change, Elsevier, vol. 166(C).
    14. Mimouni, Karim & Smaoui, Houcem & Temimi, Akram & Al-Azzam, Moh'd, 2019. "The impact of Sukuk on the performance of conventional and Islamic banks," Pacific-Basin Finance Journal, Elsevier, vol. 54(C), pages 42-54.
    15. Valipour Pasha , Mohammad & Arshadi , Ali, 2015. "Degree of Leverage Ratio Analysis in the Iranian Banking Network," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 10(2), pages 91-111, January.
    16. Julius Yaw Asamoah & Linda Owusu-Agyei, 2020. "The Impact of ICT on Financial Sector Policy Reforms in Post-Financial crisis era in Ghana: An institutional theory perspective," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 9(2), pages 82-100, April.
    17. Ahmed Rufai Mohammad & Mohamad Helmi Bin Hidthiir & Alias Mat Nor, 2018. "The Impact of Reserves Debt Ratio on Profitability of Commercial Banks: Lesson from Nigeria," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 8(2), pages 1419-1419.
    18. Phan, Dinh Hoang Bach & Narayan, Paresh Kumar & Rahman, R. Eki & Hutabarat, Akhis R., 2020. "Do financial technology firms influence bank performance?," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    19. Adalessossi, Kokou, 2023. "Impact of E-Banking on the Islamic bank profitability in Sub-Saharan Africa: What are the financial determinants?," Finance Research Letters, Elsevier, vol. 57(C).
    20. Goodhope Hance Mkaro & Lin Sea Lau & Chee Keong Choong, 2023. "The determinants of banking sector performance in Tanzania: A pre-post Treasury Single Account analysis," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(2), pages 2282812-228, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ids:ijepee:v:13:y:2020:i:2:p:152-172. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sarah Parker (email available below). General contact details of provider: http://www.inderscience.com/browse/index.php?journalID=219 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.