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Influence of some financial indicators on return on equity ratio in the Romanian energy sector - A competitive approach using a DuPont-based analysis

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  • Bunea, Ovidiu-Iulian
  • Corbos, Razvan-Andrei
  • Popescu, Ruxandra-Irina

Abstract

This study aimed to identify the financial indicators that strongly affect the return on equity (ROE) in the Romanian energy industry. Literature has revealed that firms that benefit from a higher ROE ratio often have some competitive advantage that allows for greater profit and thus greater return for investors. In this context, it seems absolutely necessary to identify and study those factors that have the strongest influence on ROE. The research was carried out on a sample of 1253 companies from the Romanian energetic industry. To identify the most powerful drivers of ROE we used a linear regression model. Also, the analysis was performed on three groups of companies, divided by their size to see any differences in drivers of ROE, depending on the company’s belonging to a particular group. Other financial ratios were introduced into the research. Thus, the study involved the use of five indicators/ratios that were believed to have a major influence on ROE. According to the results we have obtained, asset turnover, price to earnings, price to book and financial leverage were the most relevant ratios to determine ROE, with the indication that asset turnover and price to earnings have had the strongest influence.

Suggested Citation

  • Bunea, Ovidiu-Iulian & Corbos, Razvan-Andrei & Popescu, Ruxandra-Irina, 2019. "Influence of some financial indicators on return on equity ratio in the Romanian energy sector - A competitive approach using a DuPont-based analysis," Energy, Elsevier, vol. 189(C).
    • Handle: RePEc:eee:energy:v:189:y:2019:i:c:s0360544219319462
    DOI: 10.1016/j.energy.2019.116251
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    4. Sirin, Selahattin Murat & Uz, Dilek & Sevindik, Irem, 2022. "How do macroeconomic dynamics affect small and medium-sized enterprises (SMEs) in the power sector in developing economies: Evidence from Turkey," Energy Policy, Elsevier, vol. 168(C).
    5. Moise Dumitru-Florin, 2023. "Impact of the Influence Factors for the Operating Profit of Companies from Romanian Agri-Business Sector," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 17(1), pages 537-548, July.
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    7. Gergő Tömöri & Vilmos Lakatos & Bernadett Béresné Mártha, 2021. "The Effect of Financial Risk Taking on Profitability in the Pharmaceutical Industry," Economies, MDPI, vol. 9(4), pages 1-14, October.
    8. Dariusz Kusz & Iwona Bąk & Beata Szczecińska & Ludwik Wicki & Bożena Kusz, 2022. "Determinants of Return-on-Equity (ROE) of Biogas Plants Operating in Poland," Energies, MDPI, vol. 16(1), pages 1-22, December.
    9. Katarzyna Goldmann & Aleksander Zawadzki, 2022. "Financial Sector Analysis of Companies in the Energy Industry Listed on the Warsaw Stock Exchange," Energies, MDPI, vol. 15(22), pages 1-23, November.
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    11. Dirk Beyer & Jana Hinke, 2020. "European benchmarking of determinants of profitability for companies with accrual accounting in the agricultural sector," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(11), pages 477-488.

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