Correlation Matrix
| ROA | Lnta | Eqta | Curr | Sturn | Cfoprev | Cap | Inf | WUI | |
|---|---|---|---|---|---|---|---|---|---|
| ROA | 1 | ||||||||
| Lnta | 0.0713 | 1 | |||||||
| Eqta | 0.2700 | -0.2669 | 1 | ||||||
| Curr | 0.0105 | -0.2170 | 0.5042 | 1 | |||||
| Sturn | 0.0227 | 0.2161 | -0.0885 | -0.1525 | 1 | ||||
| Cfoprev | 0.6363 | 0.0923 | 0.2899 | -0.0005 | 0.0026 | 1 | |||
| Cap | -0.0862 | -0.1973 | -0.0443 | -0.0301 | 0.3976 | -0.0382 | 1 | ||
| Inf | 0.0617 | -0.0701 | 0.1223 | 0.0963 | -0.0171 | 0.2004 | -0.0719 | 1 | |
| WUI | -0.0153 | 0.0125 | -0.0680 | -0.0341 | 0.0273 | 0.1139 | -0.0082 | 0.0195 | 1 |
Definition of Variables and Descriptive Statistics
| Variables | Notation | Calculation | Obs. | Mean | Std Dev. | Min | Max |
|---|---|---|---|---|---|---|---|
| Dependent Variables | |||||||
| Return on Assets | ROA | (Profit before tax / Total assets) * 100 | 386 | 2.58 | 9.79 | -61.50 | 53.47 |
| Independent Variables | |||||||
| Total Assets (size) | Lnta | Natural Logarithm of Total Assets | 386 | 10.86 | 1.66 | 6.51 | 16.39 |
| Equity to Total Assets | Eqta | (Shareholder’s Equity / Total Assets) | 386 | 0.51 | 0.27 | -0.67 | 0.99 |
| Current Ratio | Curr | Current Assets / Current Liabilities | 386 | 3.24 | 5.33 | 0.14 | 42.18 |
| Operating Rev to Stocks | Sturn | Operating Revenue / Stocks | 386 | 5.02 | 5.37 | 0.29 | 58 |
| Cash Flow to Op. Rev. | Cfoprev | (Cash Flow/Operating Revenue)*100 | 386 | 6.36 | 17.39 | -91.92 | 95.98 |
| Capital Intensity | Cap | Fixed Assets / Sales | 386 | 13.26 | 151.07 | 0.03 | 2715 |
| Inflation | Inf | Consumer Prices (annual %) | 386 | 1.13 | 1.47 | -1.74 | 5.06 |
| World Uncertainty Index | Wui | WUI (GDP Weighted Average) | 386 | 25644 | 7051 | 17772 | 40649 |
Regression Results
| Variables | Model 1 | Model 2 | ||
|---|---|---|---|---|
| ROA (Dep. Var.) | Coefficient | Robust Std. Err. | Coefficient | Robust Std. Err. |
| lnta | 0.2604309 | 0.365003 | -0.4812073 | 0.4259563 |
| eqta | 8.808909** | 3.557638 | 11.17354*** | 3.707153 |
| curr | -0.0449675 | 0.0984208 | -0.0010337 | 0.095327 |
| sturn | 0.084396 | 0.0895613 | 0.1074277 | 0.0912723 |
| cfoprev | 0.372333*** | 0.0551491 | 0.3645428*** | 0.0537229 |
| cap | -0.0040539*** | 0.0010833 | -0.003858*** | 0.0010398 |
| inf | -0.2771021 | 0.2069265 | -0.1589167 | 0.1937531 |
| WUI | -0.0001145*** | 0.0000394 | -0.0001108*** | 0.0000388 |
| eastern dummy | -6.253984*** | 2.376418 | ||
| _cons | -3.965257 | 4.64439 | 4.479776 | 5.143428 |
| Year dummies | NO | NO | ||
| Number of obs | 386 | 386 | ||
| Number of groups | 44 | 44 | ||
| lnta | 0.2970391 | 0.3716105 | -0.5001217 | 0.4237718 |
| eqta | 9.31993*** | 3.619772 | 11.97125*** | 3.817554 |
| curr | -0.0454016 | 0.100601 | 0.0017466 | 0.0983472 |
| sturn | 0.0773267 | 0.088064 | 0.0988482 | 0.0881473 |
| cfoprev | 0.3661716*** | 0.0535317 | 0.3572736*** | 0.0516715 |
| cap | -0.0042005*** | 0.0011124 | -0.0039599*** | 0.0010655 |
| inf | -0.0123922 | 0.4578236 | 0.2226241 | 0.4685663 |
| WUI | -0.0002448* | 0.0001357 | -0.0002498* | 0.0001362 |
| eastern dummy | -6.896852*** | 2.516986 | ||
| _cons | -2.1429 | 5.531343 | 6.772484 | 5.366389 |
| Year dummies | YES | YES | ||
| Number of obs | 386 | 386 | ||
| Number of groups | 44 | 44 | ||
Pre-estimation Diagnostic Tests
| Test | Results | |
|---|---|---|
| Breusch and Pagan Lagrangian multiplier test | chibar2(01) = 173.49; | Prob > chibar2 = 0.0000 |
| Hausman test | chi2(7) = 12.53 ; | Prob>chi2 = 0.0844 |