Investigating the Effect of Capital Expenditure and Age on Profitability: A Study of Listed Manufacturing Firms in Bangladesh

Published Online: 09 September, 2024 || Published in Print: 20 September, 2024

Abstract

The study has been conducted to investigate whether firms’ capital expenditure and age have any impact on profitability. To serve this purpose, around 38 listed manufacturing companies of Dhaka Stock Exchange have been considered. Capital expenditure and age of the business since its commencement have been considered as independent variables where return of assets (ROA) as a proxy for profitability has been considered as dependent variable. To normalize the variability, the study used the natural logarithm of the said variables. To consider the confounding effect, the study also considered five control variables: total assets as proxy for firm size, debt to total assets as proxy for financial leverage, GDP growth as proxy for economic growth, the presence of COVID and one period lag on dependent variable. Based on the results of Hausman test, the study used Random Effect Model. In addition, owing to presence of heteroskedasticity and serial correlation, the study further accommodated Panel
Corrected Standard Errors (PCSE) to interpret its findings. The findings of the study suggest that both capital expenditure and age of the firm have positive and significant effect on the profitability of the firms.