DETERMINANTS OF RETURN ON EQUITY: A CASE OF NON-FINANCIAL COMPANIES FROM PORTUGAL

Abstract

The main objective of this study is to determine the variables that explain the profitability of non-financial companies in Portugal. To this end, we used a set of variables specific to the company and one of a macroeconomic nature to study the Return on Equity. The sample consists of 104 Portuguese non-financial companies, which were subsequently separated according to their size, with the studied period being from 2014 to 2017, and we used a multiple linear regression model to estimate the results. The results obtained suggest that small companies benefit from the level of inventories they have, but that their size and asset tangibility negatively affect their profitability. In relation to medium-sized companies, the capital structure and the asset tangibility negatively affect profitability. In the case of large companies, age affects profitability in a positive way, while the size and capital structure affect it in a negative way.