Track: Business Management

Abstract

This paper investigates the relationship between firm – specific factors and profitability in transportation sub-sector industry in Indonesia. The study has collected data from Indonesia Stock Exchange (BEI) of 26 firms from 2015 to 2019. This study explores three hypotheses explaining the relation between (i) Leverage and profitability; (ii) Firm size and firm’s Profitability; and (iii) Sales growth and firm’s profitability. Primarily OLS has been applied using STATA 16 software, followed by panel data estimation. In our results we do not observe that leverage can induce profitability in the study object. At the same time, sales growth and profitability is not correlated strongly. When we apply separate regression, leverage with DER and LDER proxies have strong effect on firm’s profitability. Also, the relationship between firm size and profitability is strong in the 2 regressions. Meanwhile sales growth does not affect profitability.  ROA has been used as the proxy of firm profitability. The results derived from regressions can put light on firm’s performance specifically in transportation sub sector and, simultaneously, may set guidance for principal to make strategic decision for the company.

Keywords

Leverage, firm size, sales growth, profitability