Correlates Of Profitability Of Large And Medium Scale Manufacturing Industries In Ethiopia

The purpose of this study is an attempt to explore the impact of various industry marketrnstructure elements (such as: Advertising Intensity, Capital Intensity, Inventory Turnover,rnFirm Size, etc.) on profitability measurements of large and medium scale manufacturingrnindustries of Ethiopia. The analysis is based on balanced panel data of 91 firms over thernperiod 1997 to 2006. To this effect, three accounting measures of firm’s profitability werernutilized: Price cost margin (PCM), Before tax profit rate (BTAP) and Return on Assetsrn(ROA). Even though the results vary according to the measure of profitability employed,rnthese findings support those Leahy (1998), who found that the results did not varyrnsystematically according to estimation method. The study findings generally indicate thatrnfirm size, market share, inventory turn over and relative productivity index are associatedrnpositively and significantly with firm’s profitability, while a significant negativernrelationship is found with firm’s location, depreciation rate, firm’s age, firm’s total assetrnand import intensity. Unlike those determinants, the other variables such as domesticrndemand rate, capital intensity and advertising intensity have significant influence onrnfirm’s profitability, but with mixed sign.rnKey words: Balanced panel, industry market structure elements, firm profitability

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