Determinants of Profitability: Evidence from Real Sector Firms Listed in Borsa Istanbul

Abstract

The purpose of this study is to examine empirically the influence of firm-specific factors on the profitability for 153 listed real sector firms in Turkey for a period of eight years from 2005 to 2012. In our study, it is also analyzed if there are differences in firm profitability according to firm size and firm age. Estimation results obtained from the panel data models seem to imply that, on the whole, profitability measured by return on assets (ROA) of publicly traded real sector firms in Borsa Istanbul Stock Exchange is mostly driven by firm size, liquidity level, asset tangibility, debt structure measured by the ratio of total liabilities to total assets, stock return volatility, firm age, and financial crisis. On the other hand, the results of the conducted panel analysis reveal that growth opportunities measured by the ratio of capital expenditure to sales have no statistically significant impact on the profitability of real sector firms.