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 Lankaand Malaysia over the period of 2006 to 2008, and compares the performance of thesecompanies against two commonly used financial performance indicators: Return onAssets (ROA) and Return on Equity (ROE). The results indicate that during this periodSri Lankan manufacturing companies were considerably more profitable than theircounterparts in Malaysia in terms of ROA but less profitable in terms of ROE. It alsoidentifies a relatively weaker position of equity investments in the manufacturing sectorof Sri Lankan companies and attributes this to a number of factors, including: arelatively poor equity market, high interest rates, and excessive fear of high-riskinvestment. A similar trend was observed when the profitability and equity ofcompanies were analysed by industry.