The Determinants of Profitability of the Pharmaceutical Industry of Bangladesh: A Random Effect Analysis

Abstract

The present study investigates the factors affecting the profitability of the pharmaceutical industry of Bangladesh. Using the data of 20 listed pharmaceutical companies fully functional in Bangladesh, we found both the firm specific and the macroeconomic specific variables affect the profitability of the companies. A panel dataset of 10 years starting from 2007 to 2016, we ran the random effect regression. The regression output depicts that among the firm specific variables, sales, operating income, operating cost, return on equity and total liabilities have significant effect on the profitability of the companies. We also found that the GDP growth rate and the rate of inflation among the macroeconomic variables have significant deterministic role on the profitability. The regression results followed by recommendations will be a great help to the policy makers both from inside and outside of the corporations.

The Profitability Analysis of the Logistics Industry Companies in the Balkan Countries

“…Positive relationship was confirmed by Lee [22] and Pervan et al [32]. Despite these findings, Islam and Khan [40] found that the sales to total asset ratio had a negative effect on the company profitability.…”

“…The positive growth -profitability relationship shows that the level of profitability is higher in companies where growth in sales has been noticed [31]. Asimakopoulos et al [19] suggested Goddard et al [27]; Maçãs Nunes et al [34]; Serrasqueiro [15]; Eriotis et al [38]; Doğan [39]; Al-Jafari and Al Samman, [24]; Alarussi and Alhaderi [16]; Islam and Khan [40]; Agiomirgianakis et al [17] Company size measured by sales Abey and Velmurugan [31]; Alarussi and Alhaderi [16]; Asimakopoulos et al [19]; Doğan [39]; Al-Jafari and Al Samman [24]; Pratheepan [25]; Banchuenvijit [20]; Serrasqueiro [15]; Bhutta and Hasan [26]; Denčić-Mihajlov [36] Agiomirgianakis et al [17]; Abu-Tapanjeh [18]; Dhawan [37] Company size measured by assets Multifactor regression analysis Goddard et al [27] Panel data model Maçãs Nunes et al [34] Dynamic Panel data model Serrasqueiro [15] Dynamic Panel data model Eriotis et al [38] Ordinary Least Square Regression Doğan [39] Multiple Regression Analysis Al-Jafari and Al Samman [24] Panel Ordinary Least Squares model Alarussi and Alhaderi [16] Pooled Ordinary Least Squares Regression Islam and Khan [40] Random-effects Panel data model Agiomirgianakis et al [17] Panel EGLS (Cross-section weights) method Boadi et al [13] Ordinary Least Square Regression Tapanjeh [18] Regression analysis Dhawan [37] Fixed-effects Panel data model Abey and Velmurugan [31]...…”

“…Company size can also be measured as a Logarithm of Total Assets. The results of recent research [21,40] have revealed a positive size -profitability relationship. Lee [22] found that larger companies tended to generate higher profitability but the rate of profit gains were going down as companies continued to grow.…”

“…According to Pratheepan [25] there is a negative relationship between asset tangibility and profitability, due to the fact that manufacturing companies with a higher level of tangible assets are the ones effects on company profitability. Many authors have found a negative effect of leverage on company profitability [15,16,24,27,34,38,39,40]. All these studies have shown that the level of profitability is greater with low-leverage companies.…”

Increasing Profitability of the Halal Cosmetics Industry using Configuration Modelling based on Indonesian and Malaysian Markets

“…The number of studies on modelling a firm's profitability has increased in recent years (e.g., Hirsch and Schiefer, 2016;Lee and Alnahedh, 2016;Hongwei et al, 2017;Islam and Khan, 2019). Some of them focused on cultural/religion-oriented markets from consumer perspective (Aisyah, 2017;Mustafar et al, 2018;Nawawi, Roslin and Hamid, 2018;Shahid, Ahmed and Hasan, 2018;Sriminarti and Nora, 2018;Putri, Daryanti and Ningtias, 2019).…”