DuPont decomposition of return on assets in Indonesian retail firms, 2022–2024

Evi Puspita Sari () and Nisfu Fhitri ()
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Evi Puspita Sari: Management Study Program, Faculty of Economics, Asahan University
Nisfu Fhitri: Management Study Program, Faculty of Economics, Asahan University

Priviet Social Sciences Journal, 2026, vol. 6, issue 5, 443-462

Abstract: Profitability in the Indonesian retail subsector reflects the joint operation of operating-cycle efficiency, capital-structure composition, and margin discipline. The DuPont identity (DuPont de Nemours, 1919; Soliman, 2008) expresses Return on Assets (ROA) as the product of Net Profit Margin (NPM) and Total Asset Turnover (TATO); the static trade-off theory (Modigliani & Miller, 1963; Myers, 1984) and the pecking-order hypothesis (Myers & Majluf, 1984) provide competing predictions on the sign of the leverage–profitability relationship. This study presents a pooled-OLS DuPont decomposition of ROA with the Debt-to-Asset Ratio (DAR) as an incremental control, using a balanced firm-year sample drawn from retail subsector firms listed on the Indonesia Stock Exchange (IDX) over 2022–2024. The study deliberately frames the OLS specification as an associational decomposition rather than as a strong determinant model, because two of the three predictors (NPM, TATO) are accounting-arithmetic components of the dependent variable (ROA). A purposive sampling procedure applied to a population of 29 listed retail firms produced a balanced sample of 19 firms with three years of complete audited financial statements, yielding 57 firm-year observations. The OLS regression was estimated with standard classical-assumption diagnostics (Kolmogorov-Smirnov normality; VIF multicollinearity; scatterplot and Glejser heteroscedasticity; Durbin-Watson autocorrelation), all satisfied at conventional thresholds. Results show that TATO and NPM are positively and significantly associated with ROA (TATO: B = 0.030; t(53) = 5.88; p

Keywords: DuPont decomposition; asset turnover; Debt-to-Asset Ratio; Net Profit Margin; Return on Assets; capital structure; trade-off theory; pecking order; Indonesia Stock Exchange; retail subsector (search for similar items in EconPapers)
Date: 2026
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DOI: 10.55942/pssj.v6i5.1926

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