Abstract
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This paper uses empirical data on 161 listed manufacturing companies in Sri Lanka
and Malaysia over the period of 2006 to 2008, and compares the performance of these
companies against two commonly used financial performance indicators: Return on
Assets (ROA) and Return on Equity (ROE). The results indicate that during this period
Sri Lankan manufacturing companies were considerably more profitable than their
counterparts in Malaysia in terms of ROA but less profitable in terms of ROE. It also
identifies a relatively weaker position of equity investments in the manufacturing sector
of Sri Lankan companies and attributes this to a number of factors, including: a
relatively poor equity market, high interest rates, and excessive fear of high-risk
investment. A similar trend was observed when the profitability and equity of
companies were analysed by industry.