Firm-Level and Macroeconomic Influences on the Profitability of Textile Industries in Bangladesh

A Panel Data Approach

Abstract

Purpose: The objective of this research is to investigate the firm-specific and macroeconomic factors that influence the profitability of textile industries in Bangladesh.

Methods: In this study, the financial statements of thirty-eight textile firms from 2017 to 2023 were examined. The websites of the International Monetary Fund, the World Bank, and the Bangladesh Bank were utilized to gather macroeconomic statistics. The panel data were analyzed using a random-effect regression model.

Results: The results show that firm-specific characteristics such as liquidity, managerial efficiency, capital intensity, and earnings after tax (EAT)as a ratio of total assets improve the ROA of textile industries in Bangladesh. However, firm-specific characteristics such as firm size have a detrimental influence on the profitability of Bangladesh's textile industry. Additionally, macroeconomic variables such as real interest rates have a substantial impact on the ROA of Bangladesh's textile sector. Additionally, the study found that firm age, board size, GDP growth rate, and exchange rate had no significant impact on the profitability of textile firms in Bangladesh.

Implications: The study makes a valuable contribution to understanding the issues affecting the profitability of textile industries in Bangladesh and offers insights into measures that can be taken to enhance their financial performance.

Originality: This study is novel in its integration of firm-level and macroeconomic factors to evaluate profitability in Bangladesh's textile sector, utilizing recent panel data (2017–2023). It provides a comprehensive perspective through random-effects regression and emphasizes previously under-examined variables, such as the EAT ratio and real interest rates.