The Determinants of Profitability of the Pharmaceutical Industry of Bangladesh: A Random Effect Analysis

Abstract

The present study investigates the factors affecting the profitability of the pharmaceutical industry of Bangladesh. Using the data of 20 listed pharmaceutical companies fully functional in Bangladesh, we found both the firm specific and the macroeconomic specific variables affect the profitability of the companies. A panel dataset of 10 years starting from 2007 to 2016, we ran the random effect regression. The regression output depicts that among the firm specific variables, sales, operating income, operating cost, return on equity and total liabilities have significant effect on the profitability of the companies. We also found that the GDP growth rate and the rate of inflation among the macroeconomic variables have significant deterministic role on the profitability. The regression results followed by recommendations will be a great help to the policy makers both from inside and outside of the corporations.