The Effects of Exchange Rate Volatility and Entry of Real Shareholders on the Return on Assets in the Food and Drink Companies of Tehran Stock Exchange (Dynamic Panel Data Approach)

Document Type : Original Article

Authors

1 Assistant Prof., Department of Economics, Central Tehran branch, Islamic Azad University, Tehran, Iran.

2 Ph.D. Candidate in Economic, Central Tehran Branch, Islamic Azad University, Tehran, Iran

3 Associate Prof., Department of General Economics Affairs, Kharazmi University, Tehran, Iran

Abstract

Food and drink industry has a main share in capital market and a considerable role in stock market transactions through the collection of community micro-savings. Hence, the cruicial aim of this paper is to investigate the effects of nominal exchange rate volatility and entry of real shareholders on the return on assets (ROA) in the 44 food and drink companies of Tehran stock exchange as a export oriented companies during the period of 2011-2019. For achieving this, by using of Panel GARCH method, the exchange rate volatility has been estimated and then, the impacts of this variabble with other explanatory variabbles such as entry of real shareholders, profit margin, capital and interest rate to the operational profit, have been examined on return on assets in these companies. The empirical results of model estimation by GMM estimator revealed that the exchange rate volatility has negative and entry of real shareholders has positive and significant effect on the return on assets. Moreover, the auxiliary variables like profit margin, capital and interest rate have positive, positive and negative effects on the return on assets. By results of this study, we can suggest that the financial policy makers with decreasing of exchange rate volatility through control of domestic prices and capital market stabilization policies, motivate real shareholders to enter the capital market and increase the production and profitability of food and drink companies.

Keywords

References

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Financial Management Perspective
Volume 12, Issue 39
September 2022
Pages 121-145

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