Title: Impacts of profitability and growth on stock returns of the listed manufacturing companies at Dhaka stock exchange in Bangladesh

Authors: Maisha Marium Rahim; Md. Sharif Hassan; Muhammad Mohiuddin

Addresses: Gisma Business School, University of Law, 30169 Hannover, Germany ' Faculty of Business and Communication, Universiti Malaysia Perlis, 01000 Kangar, Perlis, Malaysia; Department of Business Administration, University of Asia Pacific, Dhaka 1212, Bangladesh ' Faculty of Business Administration, Laval University, Quebec, Canada

Abstract: The study aimed to examine the impact of profitability and growth on the adjusted stock return of the listed manufacturing companies at the Dhaka stock exchange, Bangladesh. The study included 198 manufacturing companies operating in 14 sectors. The combination of cross-sectional and time-series data has constituted panel data. We hypothesise the positive and significant relationship between profitability and growth, and stock returns, pooled OLS multiple regression model, fixed effect regression model, and random effect regression model has been developed. The findings showed that all the independent variables except for the operating profit margin (OPM) positively impact the stock return. The variables did not influence the investor's stock investment decision, except for the net profit growth (NPG) measure. The positive connection between other profitability ratios and the stock return has not turned out to be robust and significant mainly because of the speculative and non-analytical investment decision-making by individual-level investors.

Keywords: gross profit margin; GPM; operating profit margin; OPM; net profit margin; NPM; ROA; ROE; gross profit growth; GPG; net profit growth; NPG; adjusted stock return; panel data analysis.

DOI: 10.1504/IJMFA.2023.131763

International Journal of Managerial and Financial Accounting, 2023 Vol.15 No.3, pp.372 - 392

Received: 24 Mar 2022
Accepted: 21 Sep 2022
Published online: 30 Jun 2023 *

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