Factors Affecting Financial Performance (In Case Study Of Habesha Cement Factory S.C. Holeta, Oromia, Ethiopia)

Abstract

The research explores the factors affecting the financial performance of Habesha Cement Factory Share Company employing a dataset spanning 11 years (2007-2017). Therefore, the main objective of this study was to examine the factors affecting the financial performance of Habesha Cement Factory Share Company. To this end, the study utilized a balanced time series data covering the study period from 2007 -2017 E.C. Moreover, the study used secondary data from the annually complied report of the organization. The study considered financial performance (ROE) as a dependent variable and firm size (FS), company’s age (CA), inflation (INF), liquidity ratio (L), and gross domestic product (GDPG) as the explanatory variables (independent variables). For the regression part, the study used ordinary least square (OLS) regression model. Before, the analysis carried out descriptive statistics, correlation matrix, multicollinearity test, variance inflation factor (VIF) test, heteroscedasticity test, and autocorrelation test to check the reliability of the result. The regression result showed that out of five variables four of them namely; firm size, inflation, company age, and gross domestic product were statistically significant. More specifically, firm size, company age, and gross domestic product, were statistically significant and had a positive impact on financial performance. Whereas, inflation had a negative impact on financial performance and statistically significant at 1% significance level. Based on the finding, the firm size, inflation, company age, and gross domestic product were identified as factors affecting the financial performance of Habesha Cement Factory S.C during the study period (2007-2017). Based on this finding, the study suggests that, the management bodies of the Habesha Cement factory S.C should give high attention on firm and industry related variables, particularly liquidity ratio and inflation for better financial performance of the organization