What are the Factors Affecting Return on Assets? An Application for Enterprises in BIST Electricity Sector
DOI:
https://doi.org/10.63556/tisej.2025.1508Keywords:
Return on assets, BIST, electricity sector, panel data analysis, financial statement analysisAbstract
The electricity sector is highly sensitive to economic fluctuations due to its high capital requirement, long-term investment processes and sensitivity to the framework. In this context, how effectively enterprises utilise their assets and their ability to sustain their profitability are critical to financial performance. Return on assets is a financial performance indicator that shows how effectively enterprises utilise their assets. Especially in the capital-intensive electricity sector, determining the right investment and financing strategies is important to ensure the profitability and sustainability of enterprises.
This study analyses the factors affecting the return on assets of enterprises operating in the BIST Electricity sector. In the study, 9 firms in the BIST Electricity sector, which are continuously operating in the period 2014-2022 and whose data are fully available, are used in the analyses. Financial indicators of these firms are analysed and panel data analysis is applied to determine the main variables affecting return on assets.
The results of the analyses reveal that the most important factor affecting the return on assets is debt. High indebtedness negatively affects return on assets by reducing net profit due to interest payments and repayment obligations, increases financial risks and weakens investor confidence. Therefore, targeting growth with internal resources instead of borrowing may contribute to a more sustainable and profitable financial structure in the long run.
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