Impact of WACC on Firm Profitability: Evidence from the Food and Allied Industry of Bangladesh



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Submitted Oct 12, 2022
Published Nov 10, 2022
10.24018/ejbmr.2022.7.6.1707

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The research paper aims to analyze the underlying relationship in between the profitability and cost of funds of a firm. A total of twelve companies were selected as a sample for this study which is listed in Dhaka Stock Exchange under Food and Allied Industry. A panel data set of 15 years from 2005 to 2019 was used to conduct the necessary analysis. In this paper, Return on Asset (ROA) is used as the accounting criteria of profitability. WACC is the independent variable while Firm Size, Firm Age and Firm Leverage are used as control variable for the study.  Fixed Effects Panel Regression Model is used to analyze the dataset. The result of the analysis shows that WACC is negatively related with the profitability measure and this relationship is significant. The study has potential to be replicated by other industries like textile, cement, pharmaceutical & chemical, fuel & power, tannery etc.

Keywords: Financial Leverage, Return on Asset (ROA), Weighted Average Cost of Capital (WACC).

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