Applying the logistic regression to the effect of the Profitability ratio on the quality of financial reporting in the stock exchange for the Period 2016-2022
DOI:
https://doi.org/10.63841/iue12467Keywords:
logistic regression, Wald Test, Maximum likelihood method, Profitability ratio, Quality of Financial ReportingAbstract
This study aims to determine the effect of profit margin on the quality of financial reports using a binary logistic regression model. Therefore, in the study, an attempt was made to provide a conceptual aspect for each of the profitability ratio and quality of financial reports applicable aspects using the model.
The study was obtained based on purposeful sampling. This is the audited financial list of (11) companies in the manufacturing sector out of (28) companies registered on the Iraqi Stock Exchange for the period (2016-2022). In the study, the quality of financial reports in manufacturing firms is used as the dependent variable. against profitability ratio as the independent variables, where each (gross profit margin, net profit margin, return on assets, and return on equity) was used as a measure of profitability ratio.
The results of the analysis of this study show that the variable (return on assets) has a weak relationship with the quality of financial reports, which is the dependent variable. Since the dependent variable is influenced by the independent variable by 22.8%, and the model that has been constructed has proved a significant test and has a correct classification ability of 66.2%
References
E. K. Laitinen, “Profitability Ratios in the Early Stages of a Startup,” J. Entrep. Financ. Vol., vol. 19, no. 2, pp. 1–28, 2017.
A. M. Lipunga, “Determinants of Profitability of Listed Commercial Banks in Developing Countries: Evidence from Malawi,” Res. J. Financ. Account., vol. 5, no. 6, pp. 41–49, 2014.
C. Choiriya, F. Fatimah, S. Agustina, and F. A. Ulfa, “The Effect of Return on Assets, Return on Equity, Net Profit Margin, Earning per Share, and Operating Profit Margin on Stock Prices of Banking Companies In Indonesia Stock Exchange,” Int. J. Financ. Res., vol. 1, no. 2, pp. 103–123, 2020.
A. Zhafira and A. Lubis, “ANALISIS PENGARUH GROSS PROFIT MARGIN DAN RETURN ON EQUITY TERHADAP HARGA SAHAM PADA PERUSAHAAN SEKTOR INFRASTRUKTUR YANG TERDAFTAR DI BURSA EFEK INDONESIA PERIODE 2020-2022,” J. Penelit. dan Pengabdi. Masy., vol. 3, no. 4, pp. 1459–1467, 2023.
D. Kusmayadi, R. Rahman, and Y. Abdullah, “ANALYSIS OF THE EFFECT OF NET PROFIT MARGIN, PRICE TO BOOK VALUE, AND DEBT TO EQUITY RATIO ON STOCK RETURN,” Int. J. Recent Sci. Res., vol. 9, no. 7, pp. 28091–28095, 2018.
M. A. Y. Almumani, “An Empirical Study on Effect of Profitability Ratios & Market Value Ratios on Market Capitalization of Commercial Banks in Jordan,” Int. J. Bus. Soc. Sci., vol. 9, no. 4, pp. 39–45, 2018.
K. K. Ahmad, K. H. Salih, and S. S. Sangawi, “The Impact of Operating Cash Flow on Corporate Profitability: Amman Stock Exchange case study,” J. Econ. Adm. Sci., vol. 30, no. 140, pp. 532–543, 2024.
M. Tissen and M. Tissen, “TURNOVER RATIOS AND PROFITABILITY RATIOS CALCULATION METHODS: THE BOOK OR AVERAGE VALUE,” New Challenges Econ. Bus. Dev., pp. 851–862, 2019.
R. H. Salih, S. S. Sangawi, K. H. Salih, A. M. Ahmed, and K. K. Ahmad, “The Impact of the Current Ratio and Profitability Ratio on Solvency Ratios: An Applied Study in the Tehran Stock Exchange,” Tikrit J. Adm. Econ. Sci., vol. 20, no. 65 P1, pp. 314–330, 2024.
M. D. Tran, N. H. Dang, and T. V. H. Hoang, “Research on Misstatements in Financial Statements: The Case of Listed Firms on Ho Chi Minh City Stock Exchange,” Int. J. Appl. Bus. Econ. Res., vol. 15, no. 23 P2, pp. 499–518, 2017.
A. Hasan, D. Aly, and K. Hussainey, “Corporate governance and financial reporting quality: a comparative study,” Corp. Gov., vol. 22, no. 6, pp. 1308–1326, 2021.
P. Supsermpol, V. N. Huynh, S. Thajchayapong, and N. Chiadamrong, “Predicting financial performance for listed companies in Thailand during the transition period: A class-based approach using logistic regression and random forest algorithm,” J. Open Innov. Technol. Mark. Complex., vol. 9, pp. 1–16, 2023.
R. Mahboub, “Main Determinants of Financial Reporting Quality in the Lebanese Banking Sector,” Eur. Res. Stud. J., vol. XX, no. 4B, pp. 706–726, 2017.
D. C. ´nska-Kayzer, J. Florek, R. Staniszewski, and D. Kayzer, “Application of Canonical Variate Analysis to Compare Different Groups of Food Industry Companies in Terms of Financial Liquidity and Profitabilit,” energies Artic., vol. 14, pp. 1–16, 2021.
U. Uwah, I. A. Aji, and E. Iniabasi, “Accounting Ratios and False Financial Statements Detection: Evidence from Nigerian Quoted Companies,” AKSU J. Adm. Corp. Gov., vol. 3, no. 1, pp. 61–75, 2023.
K. H. Salih, S. S. Sangawi, and K. A. Kamal, “The Impact of the Cash Flow, Solvability, and Working Capital on Accounting Profitability with Capital Structure as a Mediation (Qatar Stock Exchange Case Study Period 2018–2022),” J. Account. Financ. Stud. ( JAFS ), vol. 19, no. 68, pp. 318–331, 2024.
Suwandi, Melinda, D. B. Pinem, Marlina, and A. B. Dahliana, “Assessing the Productive Power of Companies with Profitability Ratios,” Int. J. Publ., vol. 5, no. 1, pp. 91–100, 2023.
S. Ningsih and S. P. Sari, “ANALYSIS OF THE EFFECT OF LIQUIDITY RATIOS, SOLVABILITY RATIOS AND PROFITABILITY RATIOS ON FIRM VALUE IN GO PUBLIC COMPANIES IN THE AUTOMOTIVE AND COMPONENT SECTORS,” Int. J. Econ. Bus. Account. Res., vol. 3, no. 4, pp. 351–359, 2019.
M. Masztalerz, “PRoFit levelS And PRoFitAbility RAtioS RePoRted in the coMMunicAtionS OF PublIC COMPANIES,” Pr. Nauk. Uniw. Ekon. WE WROCŁAWIU, vol. 63, no. 4, pp. 19–28, 2019.
S. S. Sangawi, hadi M. Ahmed, H. M. N. Mohammed, and K. H. S. B, “An Investigation into the Impact of Profitability on Annual Growth Rate among the Listed Manufacturing Companies on the Iraqi Stock Exchange,” Tikrit J. Adm. Econ. Sci., vol. 19, no. 64 P2, pp. 720–739, 2023.
T. N. Nariswari and N. M. Nugraha, “Profit Growth: Impact of Net Profit Margin, Gross Profit Margin and Total Assets Turnover,” Nariswari Nugraha / Int. J. Financ. Bank. Stud., vol. 9, no. 4, pp. 87–96, 2020.
Heliani, E. Melani, S. H. Fadhilah, and T. M. Gumelar, “Analysis of the Effect of Debt to Equity Ratio, Current Ratio, Total Asset Turnover, Net Profit Margin & Gross Profit Margin on Profit Growth,” Adv. Econ. Bus. Manag. Res., vol. 2, no. 4, pp. 34–47, 2023.
Mahruzal and M. Khaddafi, “The Influence of Gross Profit Margin, Operating Profit Margin and Net Profit Margin on the Stock Price of Consumer Good Industry in the Indonesia Stock Exchange on 2012-2014,” Int. J. Business, Econ. Soc. Dev., vol. 1, no. 3, pp. 153–163, 2020.
T. Husain, Sarwani, N. Sunardi, and Lisdawati, “Firm’s Value Prediction Based on Profitability Ratios and Dividend Policy,” Financ. Econ. Rev., vol. 2, no. 2, pp. 13–26, 2020.
G. Danilov, “The impact of corporate governance on firm performance: panel data evidence from S&P 500 Information Technology,” Georg. Danilov, vol. 10, no. 86, pp. 1–25, 2024.
F. Saputra, “Analysis Effect Return on Assets (ROA), Return on Equity (ROE) and Price Earning Ratio (PER) on Stock Prices of Coal Companies in the Indonesia Stock Exchange (IDX) Period 2018-2021,” Dinasti Int. J. Econ. Financ. Account., vol. 3, no. 1, pp. 82–94, 2022.
P. Chakri, S. Pratap, Lakshay, and S. K. Gouda, “An exploratory data analysis approach for analyzing financial accounting data using machine learning,” Decis. Anal. J., vol. 7, pp. 1–20, 2023.
J. S. Akbar, “THE EFFECT OF RETURN ON ASSETS AND RETURN ON EQUITY ON PRICE TO BOOK VALUE ON BANKING COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE,” Int. J. Econ. Bus. Account. Res., vol. 5, no. 2, pp. 9–20, 2021.
T. K. Kaawaase, C. Nairuba, B. Akankunda, and J. Bananuka, “Corporate governance, internal audit quality and financial reporting quality of financial institutions,” Asian J. Account. Res., vol. 6, no. 3, pp. 348–366, 2021.
K. Shankaraiah and S. M. S. Amiri, “Audit Committee Quality and Financial Reporting Quality: A Study of Selected Indian Companies,” J. Din. Akunt. dan Bisnis, vol. 4, no. 1, pp. 1–18, 2017.
A. H. Al-Dmour, M. Abbod, and N. S. Al Qadi, “THE IMPACT OF THE QUALITY OF FINANCIAL REPORTING ON NON-FINANCIAL BUSINESS PERFORMANCE AND THE ROLE OF ORGANIZATIONS DEMOGRAPHIC’ ATTRIBUTES (TYPE, SIZE AND EXPERIENCE),” Acad. Account. Financ. Stud. J., vol. 22, no. 1, pp. 1–18, 2018.
V. Palea, “IAS/IFRS and financial reporting quality: Lessons from the European experience,” China J. Account. Res., vol. 6, pp. 247–263, 2013.
A. O. Mahmood and O. M. Alzawbaee, “Determine The Factors That Influence the Company’s Failure by Using Logistic Regression Ahmed,” مجلة كلية المعارف الجامعة , vol. 2, no. 32, pp. 371–382, 2021.
G. I. Kamal and Z. J. Kazim, “(Structure Logistic Regression Model Of Anomalies Birth In Iraq Except Kurdistan Region, for 2015),” J. Econ. Adm. Sci., vol. 25, no. 113, pp. 557–574, 2019.
Hosmer, Applied Logistic Regression. 2013.
H. Kavade, A LOGISTIC REGRESSION MODEL TO CLASSIFICATION SYSTEM HUMAN FACTORS ANALYSIS AND PREDICT INCIDENT SEVERITY USING THE. 2009.
A. H. Abbas, “Using Logistic Regression Model to predict the Functions with Economic categorical Dependent variables.,” مجلة جامعة كركوك للعلوم الادارية والاقتصادية , vol. 2, no. 2, pp. 234–253, 2012.
B. A. R. Qasim, “Analyzing of impact of some variables of Gingivitis by using the logistic regression,” العلوم
الاقتصادية , vol. 27, no. 1, pp. 140–164, 2011.
L. A. Ahmed, “Using Logistic Regression in Determining the Effective Variables in Traffic Accidents,” Appl. Math. Sci., vol. 11, no. 42, pp. 2047–2058, 2017.
mohammed faiz H. Azobay and M. K. Alobaidy, “Analysis of the internal determinants of the performance of companies’ shares in the Iraqi Stock Exchange according to the logistic regression Approach during the period from 2016 – 2021,” Wraith Sci. J., vol. 6, no. 17, pp. 200–212, 2024.
S. A. Chowdhury et al., “Evaluation of the contribution of the automated accounting information system to the managerial decision-making process in the commercial bank of Bangladesh,” Int. J. Appl. Econ. Financ. Account., vol. 18, no. 5, pp. 490–506, 2024.
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Academic Journal of International University of Erbil
This work is licensed under a Creative Commons Attribution 4.0 International License.
