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Impact of WACC on Firm Profitability: Evidence from Food and Allied Industry of Bangladesh

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  • Farhana Rahman

Abstract

The research paper aims to analyze the underlying relationship in between the profitability and cost of funds of a firm. A total of twelve companies were selected as a sample for this study which are listed in Dhaka Stock Exchange under Food and Allied Industry. A panel data set of 15 years from 2005 to 2019 was used to conduct the necessary analysis. In this paper, Return on Asset (ROA) is used as the accounting criteria of profitability. WACC is the independent variable while Firm Size, Firm Age and Firm Leverage are used as control variable for the study. Fixed Effects Panel Regression Model is used to analyze the dataset. The result of the analysis shows that WACC is negatively related with the profitability measure and this relationship is significant. The study has potential to be replicated by other industries like textile, cement, pharmaceutical & chemical, fuel & power, tannery etc.

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  • Farhana Rahman, 2022. "Impact of WACC on Firm Profitability: Evidence from Food and Allied Industry of Bangladesh," Papers 2210.07955, arXiv.org.
    • Handle: RePEc:arx:papers:2210.07955
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    References listed on IDEAS

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    1. Changjun Zheng & Mohammed Mizanur Rahman & Munni Begum & Badar Nadeem Ashraf, 2017. "Capital Regulation, the Cost of Financial Intermediation and Bank Profitability: Evidence from Bangladesh," JRFM, MDPI, vol. 10(2), pages 1-24, April.
    2. Auwalu Sani Ibrahim & Muazu Saidu Badara, 2020. "Moderating Effects of Cost of Capital on Equity Financing and Firm Value in Nigeria," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 6(3), pages 81-84, September.
    3. Farhana Rahman, 2022. "Discount Puzzle Of Closed-End Mutual Funds: A Case Of Bangladesh," Papers 2209.13102, arXiv.org.
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