Examining the Impact of Financial and Structural Variables on Return on Equity in Consumer Industries: A Panel Vector Autoregression Approach
Keywords:
Return on Equity, Consumer Goods Industry, Economic Value Added, Impulse Response, Financial Dynamic Analysis, Operational Efficiency, Ownership StructureAbstract
This study aims to examine the dynamic impact of key financial and structural variables on the return on equity (ROE) of companies operating in Iraq's consumer goods industry during the period 2015 to 2024. Using panel data and employing Vector Autoregressive (VAR) models, the study analyzes the effects of shocks stemming from the variables of Economic Value Added (EVA), Operational Efficiency (OF), Price Momentum (MO), Firm Size (SIZE), Ownership Concentration (OC), and Research and Development expenditures (R&D) on ROE across three time horizons: short-term, medium-term, and long-term. Impulse response test results reveal that EVA is the only variable with a consistently positive and statistically significant impact on ROE across all time horizons—highlighting the fundamental role of economic value creation in enhancing shareholder returns in Iraq’s emerging market. Operational efficiency (OF) also shows a positive effect in the short and medium term; however, this influence diminishes in the long run, potentially due to structural changes or volatility in the consumer market. Similarly, price momentum (MO) has a significant positive effect only in the short term, reflecting the short-lived impact of market sentiment and informational inefficiencies in the Iraqi stock exchange. Firm size (SIZE) exhibits a positive effect solely in the short term, which becomes insignificant over longer periods—possibly due to managerial complexity or declining scale efficiency in larger firms. Conversely, ownership concentration (OC) demonstrates no statistically significant impact on ROE in any time frame, possibly reflecting weak regulatory structures or conflicts of interest in concentrated ownership models within Iraqi companies. The findings suggest that the persistence and depth of the variables' impact on ROE depend on time and firm-specific characteristics. These insights offer practical implications for economic policymakers, corporate managers, and investors in the Iraqi market and underscore the need to reconsider strategic priorities—particularly in areas of value creation, operational productivity, and innovation management.
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Copyright (c) 2025 Osama Abdulsalam Jothr Al-Bunajim (Author); Sara Ghobadi; Abdulrazzaq Hamad Hussein, Hossein Sharifi Renani (Author)
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
