Analyzing Financial Metrics’ Influence on Firm Performance: Evidence from Indian Companies

Abstract

This study delves into the correlation between financial metrics and net income within a sample of firms. Through regression analysis, the study evaluates the significance of Return on Equity (ROE), Return on Assets (ROA), and Book Value per Share in predicting net income. Employing three regression methods - Pooled OLS, Generalized Least Squares (GLS), and Fixed Effects (Within) - consistent, statistically significant positive associations between ROE and Book Value per Share with net income across all models were observed. This highlights their pivotal roles in bolstering firm profitability. However, the significance of ROA displays variations across models, indicating a nuanced relationship with net income. Overall, the study emphasizes the critical influence of profitability metrics and asset values in shaping firm performance and delivering returns to shareholders. These findings provide valuable insights for strategic decision-making and financial management practices aimed at optimizing firm profitability and enhancing shareholder value.