Profitability analysis of listed manufacturing companies in Sri Lanka and Malaysia: An empirical investigation

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.