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A study regarding the return on equity of romanian companies

Marian Siminica ()

Annals of University of Craiova - Economic Sciences Series, 2011, vol. 4, issue 39, 267-276

Abstract: In this article, we conducted a case study with which we highlighted the statistical correlation between the rate of return on equity (ROE) as the dependent variable and a set of 24 indicators, which represent the independent variables. The analyzed period extends over four years from 2007 to 2010, 2010 included. The study included 40 companies, listed on the Bucharest Stock Exchange, which belong to different fields. To stress the influence of the indicators taken into account concerning the rate of return on equity we used the statistical software SPPS. Following the results we noticed that there is a certain correlation between the independent variables retained and the rate of return on equity, creating in this sense four correlation models, one for each year analyzed. From the case study one can see the significant influence that the financial crisis has had starting with the second half of 2008, and also the extent to which various financial rates have been affected. For instance, the rate of return on equity, indicator that we intended to analyze in this article, suffered one of the largest declines in the analyzed period. The reason why we stopped at a thorough analysis of a rate of return is the fact that, in general, the rates of return best express the degree of efficiency of the activity of a company and the rate of return on equity, in particular, is of great importance for any investor wishing to invest in a company without assuming unjustified risks.

Keywords: return on equity; efficiency; financial leverage; financial crisis (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2011
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Handle: RePEc:aio:aucsse:v:1:y:2011:i:10:p:267-276