IMPACT OF MACROECONOMIC UNCERTAINTY ON FIRM PROFITABILITY: A CASE OF BIST NONMETALLIC MINERAL PRODUCTS SECTO

Abstract

Purpose- The aim of this study is to analyze the impact of macroeconomic uncertainty on Return on Assets (ROA) and Return on Operating Profits (ROAF) by employing panel data analysis within the sample of Borsa Istanbul Non-Metallic Mineral Products sector for the period of 2003:Q1-2016:Q4.

Methodology- Firstly; volatility levels of exchange rate, interest rate, inflation rate and growth rate were determined by Generalized Autoregressive Conditional Heteroscedasticity (GARCH) modelling. Then, the relationship between uncertainty and profitability were examined by panel data analysis.  

Findings- Our findings revealed that growth volatility, exchange rate volatility, and interest volatility had a negative effect on both return on assets (ROA) and operating profit (ROAF).  

Conclusion- Macroeconomic uncertainty has potential to affect the firm profitability through firm decision-making. The findings of this were consistent with relevant theoretical and empirical literature. In this regard, establishing and sustaining a stable macroeconomic environment is of great importance for firm profitability and in turn achieving a sustainable growth and lower unemployment rates.

Keywords

• Macroeconomic uncertainty,firm profitability,non-metallic mineral products sector,Turkey,panel data analysis

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