Profitability and Its Determinants: Panel Data Analysis of Automobile Companies in NIFTY

Abstract

Over the time, factors determining a company’s profitability have warranted special attention by different tools of scientific knowledge. The way debt is increasing, deepens the concern for liquidity and bankruptcy, ultimately impacted the revenue of service sector in general and manufacturing sector in particular. In this study, a balanced panel data of five Automobile companies listed in NSE is used for examining the determinants of profitability of automobile companies using static panel models. For study purpose, 50 observations of five automobile companies over a period of ten (10) years were included. EBIT/total assets is considered as a measure for profitability as dependent variable. Whereas, leverage, liquidity, Size, Growth opportunity, Tangibility, NDTS and Z-score are considered as independent variables. The findings of the study reveal that size and growth have direct relationship with profitability whereas, leverage has an inverse relationship and Tangibility, NDTS, liquidity and Z-score indicate insignificant impact on profitability.