The aim of this study is to examine the impact of firm specific and macroeconomic factors on profitability of food sec tor in Pakistan. This study explores the impact of firm specific factors on profitability of companies listed in food sector ofKarachistock market in the presence of food inflation by employing multivariate regression analysis in common ef fect setting for the period of 2002-2006. The firm specific factors include debt to equity, tangibility, growth and size and macroeconomic factor include food inflation. Findings of study reveal the presence of significant negative relation ship between size and profitability. However, tangibility, growth of the firm and food inflation are found insignifi cantly positively related to profitability. Similarly, an insignificant negative relationship is observed between debt to equity ratio of firm and its profitability. Empirical results provide evidence that the profitability of food sector is shaped by firm specific factors and not macroeconomic variables. One important limitation of study is that it only considers one macroeconomic factor i.e. food inflation. In future studies more macroeconomic factors will be explored to examine their impact on profitability of food sector firms. However, this study still provides significant insight about dynamics of profitability in food sector and helps in making optimal decisions of resource allocation in food sector of Pakistani equity market.
KeywordsProfitabilityFirm Specific FactorsMacroeconomic FactorFood Sector
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