A study on the effects of industry and time on profitability in listed South African companies

Abstract

The determinants of the antecedents of the profitable performance of companies are a field of interest which should be at the forefront of the mind of the executives of any profit making institution. Industry structure and its effects on profitability have long been a focus of study in the management literature. This study focuses on the effects industry and time have on profitability in the South African business milieu. A quantitative research method was followed whereby three different profitability ratios were calculated across two hundred and eighty nine listed South African entities over a ten year period to determine if there is a statistically significant link between industry effect and profitability as well as time and profitability. The study was undertaken in the form of hypotheses tests to determine if such links did exist. In the empirical evidence resulting form the hypothesis tests, three out of the three tests for industry effect on profitability were found to be statistically significant and two of the three tests for the effect of time on profitability were found to be statistically significant. These results show that in South African listed companies, industry has a statistically significant effect on profitability. While the effect of time on profitability does appear to be statistically significant however this is dependent on the types of profitability measures used.