Does Macroeconomic and Firm Specific Factors drive Corporate Profitability? New Evidence from Pakistan

Abstract

The aim of the paper is to analyze the impact of macroeconomic and firm specific factors on corporate profitability. Data for the period 2010-2019 is collected from listed Pakistani firms. Findings of the study reveal that corporate profitability is significantly and positively influenced by firm size and liquidity whereas corporate profitability is significantly and negatively influenced by leverage. GDP affects EPS positively but its impact on ROE and ROA is negative. Exchange rate also has a negative impact on corporate profitability. Real interest has a strong negative effect on ROA but on EPS and ROE, the effect is insignificant. Real interest has a strong negative effect on ROA but on ROE and EPS the effect is insignificant.