IMPACT OF MACROECONOMIC UNCERTAINTY ON FIRM PROFITABILITY: A CASE OF BIST NONMETALLIC MINERAL PRODUCTS SECTO

Purpose- The aim of this study is to analyze the impact of macroeconomic uncertainty on Return on Assets (ROA) and Return on Operating Profits (ROAF) by employing panel data analysis within the sample of Borsa Istanbul Non-Metallic Mineral Products sector for the period of 2003:Q1-2016:Q4. Methodology- Firstly; volatility levels of exchange rate, interest rate, inflation rate and growth rate were determined by Generalized Autoregressive Conditional Heteroscedasticity (GARCH) modelling. Then, the relationship between uncertainty and profitability were examined by panel data analysis. Findings- Our findings revealed that growth volatility, exchange rate volatility, and interest volatility had a negative effect on both return on assets (ROA) and operating profit (ROAF). Conclusion- Macroeconomic uncertainty has potential to affect the firm profitability through firm decision-making. The findings of this were consistent with relevant theoretical and empirical literature. In this regard, establishing and sustaining a stable macroeconomic environment is of great importance for firm profitability and in turn achieving a sustainable growth and lower unemployment rates.

Keywords:

Macroeconomic uncertainty, firm profitability, non-metallic mineral products sector Turkey, panel data analysis,

PDF

___

Adjasi, C., Harvey, S. K. and Agyapong, D. 2008, ”Effect of Exchange Rate Volatility on the Ghana Stock Exchange”, African Journal of Accounting, Economics, Finance and Banking Research, vol.3, no.3, pp. 28-47.
Aggarwal, R. 1981, “Exchange Rates and Stock Prices: A Study of the U.S. Capital Markets under Floating Exchange Rates”, Akron Business and Economic Review, vol. 12, pp. 7-12.
Ahmad, N., Salman, A. and Shamsi, A. F. 2015, “Impact of Financial Leverage on Firms’ Profitability: An Investigation from Cement Sector of Pakistan”, Research Journal of Finance and Accounting, vol. 6, no. 7, pp.75-80.
Akinlo, O. and Asaolu, T. 2012, “Profitability and Leverage: Evidence from Nigerian Firms”, Global Journal of Business Research, vol.6, no.1, pp. 17-25.
Alibabaee, G. and Khanmohammadi, M. H. 2016, “Economic Variables and Financial Performance of the Company”, International Business Management, vol. 10, no. 19, pp. 4561-4566.
Amariati, S. N. 2013, “The Extent to Which Financial Ratios Affect Profitability of Manufacturing Firms Listed in the Nairobi Stock Exchange”, Research Project, Kenyatta University.
Amihud, Y. 1994, “Exchange Rates and the Valuation of Equity Shares”, In Y. Amihud and R.M. Levich (Eds.), Exchange Rates and Corporate Performance, pp. 49-59. New York: Irwin.
Anlas, T. 2012, “The Effects of Changes in Foreign Exchange Rates On ISE-100 Index”, Journal of Applied Economics and Business Research, vol. 2, no. 1, pp. 34-45.
Aygun, M. 2012, “Firma Performansi Uzerinde Calisma Sermayesinin Etkisi: Turk Imalat Sektoru Uzerine Bir Uygulama”,Ege Academic Review Journal, vol.12, no.2, pp. 215-223.
Baltagi, B. 2014, Econometric Analysis of Panel Data, United Kingdom: John Wiley & Sons, Fifth edition.
Bartov, Eli and Bodnar, G. M. 1994, “Firm Valuation, Earnings Expectations and the Exchange Rate Exposure Effect”, Journal of Finance, no. 49, pp. 1755-86.
Baum, C. F., Caglayan, M. and Barkoulas, J. T. 2001, “Exchange Rate Uncertainty and Firm Profitability”, Journal of Macroeconomics, vol. 23, no.4, pp. 565-576.
Bloom, N. 2014,”Fluctuations in Uncertainty”, Journal of Economic Perspectives, vol.28, No.2, pp. 153-176.
Breusch, T. S. and Pagan, A. R. 1980, ”The Lagrange Multiplier Test and Its Applications to Model Specification in Econometrics”, Review of Economic Studies, vol. 47, no. 1, pp. 239-253.
Chow, G.C. 1960, “Test of Equality between Sets of Coefficients in Two Linear Regressions”, Journal of the Econometric Society Econometrica, vol. 28, no. 3, pp. 591-605.
Demir, F. 2009, “Financialization and Manufacturing Firm Profitability under Uncertainty and Macroeconomic Volatility: Evidence from an Emerging Market”, Review of Development Economics, vol. 13, no. 4, pp. 592-609.
Dogan, M. and Topal, Y. 2016, “Kârliligi Belirleyen Faktorler: BIST’te Islem Goren Imalat Sanayi Firmalari Uzerine Bir Arastirma”, Optimum Ekonomi ve Yonetim Bilimleri Dergisi, vol. 3, no. 1, pp. 53-64.
Dumas, B. 1978, “The Theory of the Trading Firm Revisited”, Journal of Finance, vol. 33, no. 3, pp. 1019-1030.
Erdal, B. 2001, “Investment Decisions under Real Exchange Rate Uncertainty”, Central Bank Review, no. 1, pp. 25-47.
Flota, C. 2014, “The Impact of Exchange Rate Movements on Firm Value in Emerging Markets: The Case of Mexico”, American Journal of Economics, vol. 4, no. 2A, pp. 51-72.
Goddard, J., Tavakoli, M. and Wilson J. 2005, ‘‘Determinants of Profitability in European Manufacturing and Services: Evidence from a Dynamic Panel Model’’, Applied Financial Economics, vol.15, no.18, pp. 1269-1282.
Hadri, K. and Kurozumi, E. 2012, “A Simple Panel Stationarity Test in the Presence of Serial Correlation and a Common Factor”, Economic Letters, no. 115, pp. 31-34.
Hajilee, M. and Nasser, O. M. A. 2017, “The Impact of Interest Rate Volatility on Stock Market Development: Evidence from Emerging Market’s”, Journal of Developing Areas, vol. 51, no. 2, pp.301-313.
Hausman, J. 1978, “Specification Tests in Econometrics”, Econometrica, vol. 46, no. 6, pp. 1251-71.
Im, K. S., Pesaran, M. H. and Shin, Y. 2003, “Testing for Unit Roots in Heterogeneous Panels”, Journal of Econometrics, vol. 115, no: 1, pp. 53-74.
Jorion, P. 1990, “The Exchange-Rate Exposure of U. S. Multinationals”, Journal of Business, vol. 63, no. 3, pp. 331-345.
Kemuma, N. A. 2015, “The Effect of Foreign Exchange Rate Volatility on Profitability of Insurance Industry in Kenya”, Research Project, University of Nairobi.
Li, X. I., Balcılar, M., Gupta, R. and Chang, T. 2016, “The Causal Relationship between Economic Policy Uncertainty and Stock Returns in China and India: Evidence from a Bootstrap Rolling-Window Approach”, Emerging Markets Finance and Trade, vol. 52, no: 3, p. 674-689.
Mangla, I. U. and Din, M. 2015, “The Impact of the Macroeconomic Environment on Pakistan’s Manufacturing Sector”, The Lahore Journal of Economics, no. 20, pp. 241-260.
Mlambo, C., Maredza, A. and Sbenda, K. 2013, “Effects of Exchange Rate Volatility on the Stock Market: A Case Study of South Africa”, Mediterranean Journal of Social Sciences, vol.4, no: 14, pp. 561-570.
Musa, F. M. 2014, “The Effect of Foreign Exchange Rate Volatility on the Financial Performance of Oil Marketing Companies in Kenya”, Research Project, University of Nairobi.
Mutluay, A. H. and Turaboglu, T. T. 2013,”Doviz Kuru Degisimlerinin Firma Performansina Etkileri: Turkiye Ornegi”, Journal of BDDK Bankacilik ve Finansal Piyasalar, vol. 7, no: 1, pp. 59-78.
Odior, E. S. 2013, “Macroeconomic Variables and the Productivity of the Manufacturing Sector in Nigeria: A Static Analysis Approach”, Journal of Emerging Issues in Economics, Finance and Banking (JEIEFB), vol. 1, no. 5, pp. 362-380.
Ozmen, E., Sahinoz, S. and Yalcin, C. 2012, “Profitability, Saving and Investment of Non-Financial Firms in Turkey”, Working Paper, no: 12/14, Central Bank of the Republic of Turkey.
. Pagan, A. R. and Schwert, G. W. 1990. “Alternative Models for Conditional Stock Volatility”, Journal of Econometrics, vol. 45, pp. 267-290 Pesaran, M. and Yamagata, T. 2008, “Testing Slope Homogeneity in Large Panels”, Journal of Econometrics, vol. 142, no.1, pp. 50-93.
Poon, S. H. and Granger, C. W. J. 2003, “Forecasting Volatility in Financial Markets: A Review”, Journal of Economic Literature, vol. 41, no.2, pp. 478-539.
Salawu, R. O. and Awolowo, O. 2009, “The Effect of Capital Structure on Profitability: An Empirical Analysis of Listed Firms in Nigeria”, The International Journal of Business and Finance Research, vol.3, no.2, pp.121-129.
Sâman, C. 2010, “Macroeconomic Uncertainty and Investment-Empirical Analysis for Romania”, Romanian Journal of Economic Forecasting, no.2, pp. 155-164.
Sariannidis, N., Giannarakis, G., Litinas, N. and Konteos, G. 2010, “A GARCH Examination of Macroeconomic Effects on U.S. Stock Market: A Distinction between the Total Market Index and Sustainability Index”, European Research Studies, vol. 13, no: 1, pp. 130-142.
Savaş, İ. and Can, İ. 2011, “Euro-Dolar Paritesi ve Reel Döviz Kuru’nun İMKB 100 Endeksi’ne Etkisi”, Journal of Eskisehir Osmangazi University Faculty of Economics and Administrative Sciences, vol. 6, no. 1, pp. 323-339.
Sekmen, F. 2011, “Exchange Rate Volatility and Stock Returns for the U.S.”, African Journal of Business Management, vol.5, no. 22, pp. 9659-9664.
Shapiro, A. C. 1974, “Exchange Rate Changes, Inflation, and the Value of the Multinational Corporation”, Journal of Finance, vol. 30, no. 2, pp. 485-502.
Uluyol, O., Lebe, F. and Akbas, Y.E. 2014, “Firmalarin Finansal Kaldirac Oranlari ile Ozsermaye Kârliligi Arasındaki İliski: Hisseleri BIST’te Islem Goren Sirketler Uzerinde Sektorler Bazinda Bir Arastirma, Isletme Arastirmalari Dergisi, vol. 6, no. 1, pp. 70-89.
Wooldridge, J. M. 2002, “Inverse Probability Weighted M-Estimators for Sample Selection, Attrition, and Stratification”, Portuguese Economic Journal, vol. 1, no.1, pp. 117-139.
Zeitun, R., Tian, G. and Keen, S. 2006, “Macroeconomic Determinants of Corporate Performance and Failure: Evidence from Emerging Market a Case of Jordan”, University of Wollongong Faculty of Commerce Papers, pp. 3-33.

Journal of Business Economics and Finance-Cover

Yayın Aralığı: Yılda 4 Sayı
Başlangıç: 2012
Yayıncı: PressAcademia

Arşiv