Financial performance analysis of eurozone listed companies using dupont model

Baptista, Andreia; Lopes, José Carlos; Alberto, Fernanda; Nunes, Alcina

http://hdl.handle.net/10198/27097

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Abstract(s)

The main objective of this paper is the analysis of factors that can influence the financial performance (measured by “return on equity”) of the Eurozone listed companies. For this purpose, we use the DuPont model to provide useful information to identify the main factors that affect profitability. The data was collected from financial statements of the Eurozone listed companies during the year 2018 (ORBIS database), and the final sample included 750 companies distributed across the 19 Eurozone countries. Using the Ordinary Least Squares (OLS) method, we studied the effects of four factors (tax burden, interest burden, EBIT margin, and assets turnover) in return on equity. The overall results suggest that all factors significantly have an influence in return on equity and, consequently, the financial performance of companies listed in the stock markets of Eurozone countries. The efficient use of total assets, measured by assets turnover, seems to be the most powerful factor with an impact of 0.94% in ROE, due to a variation of 1%. However, all the other factors also show a considerable influence on financial performance.

Keywords

DuPont model Eurozone countries Financial performance Profitability ratios Return on equity Stock markets

URI

http://hdl.handle.net/10198/27097

Citation

Baptista, Andreia; Alberto, Fernanda; Lopes, José; Nunes, Alcina (2021). Financial performance analysis of Eurozone listed companies using Dupont model. In 14th Annual Conference of the EuroMed Academy of Business. p. 52-64