CULTURE AND OTHER FACTORS AFFECTING FIRM PROFITABILITY IN PAKISTAN

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Abstract

Some of the factors which may affect firm profitability include organizational culture, investment in information technology, firm size, barriers to entry, and the financial leverage of the firm. This paper contributes to the understanding of firm profitability by examining the determinants of firm profitability in Pakistan over the period 2003-2007. A sample of 19 organizations in Pakistan was selected for an in-depth analysis. The data were collected through multiple visits to the selected sites, direct observation, questionnaires, and structured interviews with the senior and middle level business executives. A total of 95 middle and senior level managers were requested to fill out questionnaires covering different dimensions of culture mentioned in the Organizational Culture Inventory. Additionally, in order to get an insight into the deep rooted basic assumptions, detailed interviews were conducted with 80 middle and senior level managers. The data regarding investment in IT, firm size, ratio of fixed asset to total assets, and capital-asset ratio were derived from the firms’ annual reports for the period 2003-2007. The regression results show that culture, investment in information technology, firm size, capital intensity and financial leverage have significant impact on firm profitability.

Keywords: Profitability, Organizational Culture, Pakistan

How to cite this paper: El-Bannany, M. & Tipu, S. A. (2009). Culture and other factors affecting firm profitability in Pakistan. Corporate Ownership & Control, 7(1-4), 456-470. https://doi.org/10.22495/cocv7i1c4p4