Abstract
Purpose: The general objective of this study is to investigate the determinants of profitability in the case of selected Ethiopian Tannery Companies.
Methodology: The study employed an explanatory research design with a quantitative approach to assess the relationship between profitability and its determinant factors. The study had a population size of 29 Tannery Companies in Ethiopia. To undertake this research paper, the researcher used non-probabilistic sampling specifically the judgmental sampling method was used to select eight (8) sample Tannery Companies. Balanced panel data were analyzed by using descriptive statistics, correlation, and Multiple Linear regression analysis. Ordinary Least square model in the form of multiple regression analysis was applied to analyze the annual data generated from the financial statements of the selected Tannery Companies covering a period from 2008 - 2017 G.C. In this study, ROA was used as the measure of profitability.
Findings: The paper includes tangibility, firm size, liquidity, leverage, growth rate, and inventory turnover as independent factors that determine the profitability of Tannery Companies in Ethiopia. The result from the empirical examination found that only Tangibility, Inventory Turnover, and Firm growth rate have a statistically significant effect on the companies (ROA), whereas Liquidity, Leverage, and Firms size have a statistically insignificant effect on the profitability of Ethiopian Tannery Companies.
Conclusion: Besides, the study suggested that companies that give more attention to the statistically significant variables of the sectors such as firm growth rate, inventory turnover, and tangibility. While the results may not be generalizable to all Ethiopian Tannery Companies found in the country, the findings should provide valuable information to managers for developing their strategies with regard to firm-specific determinants.