Role of macroeconomic variables on firms’ performance: Evidence from the UK
The purpose of this study is to investigate the role of macroeconomic conditions and predict the base performance of a firm as represented by Return on Asset (ROA) and macroeconomic variables. The predictor variables used in the construction of the models were selected using PCA. For the full sample...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Taylor & Francis Group
2017-01-01
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| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | http://dx.doi.org/10.1080/23322039.2017.1405581 |
| _version_ | 1818923793059414016 |
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| author | Mohammed Issah Samuel Antwi |
| author_facet | Mohammed Issah Samuel Antwi |
| author_sort | Mohammed Issah |
| collection | DOAJ |
| description | The purpose of this study is to investigate the role of macroeconomic conditions and predict the base performance of a firm as represented by Return on Asset (ROA) and macroeconomic variables. The predictor variables used in the construction of the models were selected using PCA. For the full sample and the industry-specific sample of data, the regression model evaluated the significance of macroeconomic factors based on t-statistics and the R2 test. The results of the study are promising. The full sample and five out of six industry variable models incorporating lead–lag relationships have an R2 between 0.79 and 0.95. For the full sample, the results of this study indicate that macroeconomic conditions should be incorporated when predicting firms’ performance. For the industry-specific models, the empirical results present a mixed picture of the effect of macroeconomic factors and the lagged ROA on firm performance and the same conclusion for full sample cannot be reached easily when looking at the industry specific results. The results of this paper provide a compelling argument that firm performance is a function of the prior year ROA, and macro-economic variables and that macroeconomic variables and prior year ROA can have impact on future firm performance measure by ROA. |
| first_indexed | 2024-12-20T02:15:04Z |
| format | Article |
| id | doaj.art-61341c58ca1e4030a6c6c470806a11ee |
| institution | Directory Open Access Journal |
| issn | 2332-2039 |
| language | English |
| last_indexed | 2024-12-20T02:15:04Z |
| publishDate | 2017-01-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj.art-61341c58ca1e4030a6c6c470806a11ee2022-12-21T19:56:57ZengTaylor & Francis GroupCogent Economics & Finance2332-20392017-01-015110.1080/23322039.2017.14055811405581Role of macroeconomic variables on firms’ performance: Evidence from the UKMohammed Issah0Samuel Antwi1University of Professional StudiesUniversity of Professional StudiesThe purpose of this study is to investigate the role of macroeconomic conditions and predict the base performance of a firm as represented by Return on Asset (ROA) and macroeconomic variables. The predictor variables used in the construction of the models were selected using PCA. For the full sample and the industry-specific sample of data, the regression model evaluated the significance of macroeconomic factors based on t-statistics and the R2 test. The results of the study are promising. The full sample and five out of six industry variable models incorporating lead–lag relationships have an R2 between 0.79 and 0.95. For the full sample, the results of this study indicate that macroeconomic conditions should be incorporated when predicting firms’ performance. For the industry-specific models, the empirical results present a mixed picture of the effect of macroeconomic factors and the lagged ROA on firm performance and the same conclusion for full sample cannot be reached easily when looking at the industry specific results. The results of this paper provide a compelling argument that firm performance is a function of the prior year ROA, and macro-economic variables and that macroeconomic variables and prior year ROA can have impact on future firm performance measure by ROA.http://dx.doi.org/10.1080/23322039.2017.1405581return on assetfirm performancemultiple regressionprincipal component analysismacroeconomic variables |
| spellingShingle | Mohammed Issah Samuel Antwi Role of macroeconomic variables on firms’ performance: Evidence from the UK Cogent Economics & Finance return on asset firm performance multiple regression principal component analysis macroeconomic variables |
| title | Role of macroeconomic variables on firms’ performance: Evidence from the UK |
| title_full | Role of macroeconomic variables on firms’ performance: Evidence from the UK |
| title_fullStr | Role of macroeconomic variables on firms’ performance: Evidence from the UK |
| title_full_unstemmed | Role of macroeconomic variables on firms’ performance: Evidence from the UK |
| title_short | Role of macroeconomic variables on firms’ performance: Evidence from the UK |
| title_sort | role of macroeconomic variables on firms performance evidence from the uk |
| topic | return on asset firm performance multiple regression principal component analysis macroeconomic variables |
| url | http://dx.doi.org/10.1080/23322039.2017.1405581 |
| work_keys_str_mv | AT mohammedissah roleofmacroeconomicvariablesonfirmsperformanceevidencefromtheuk AT samuelantwi roleofmacroeconomicvariablesonfirmsperformanceevidencefromtheuk |