PANEL EVIDENCE ON FINANCIAL DRIVERS OF ALGERIAN FIRM’S RETURNS (2019-2024)

Abstract

This study investigates the influence of key financial variables on the profitability of Algerian firms using panel data from 37 companies spanning 2019–2024. Return on Assets (ROA) and Return on Equity (ROE) serve as dependent variables, while long-term debt ratio, financial leverage, liquidity, and firm size constitute the primary explanatory factors. Panel regression analysis reveals a significant negative association between long-term debt and ROA, indicating reduced asset efficiency under high indebtedness, whereas firm size exerts a positive effect on both profitability measures. Liquidity shows no significant impact, and financial leverage displays mixed effects across models. Robustness is confirmed through comprehensive diagnostic tests including heteroskedasticity, autocorrelation, and multicollinearity assessments. These findings offer critical implications for financial decision-making and policy formulation within Algeria's dynamic business environment. The analysis employs fixed effects models to control for firm-specific heterogeneity, providing reliable evidence on debt-profitability dynamics in an emerging market context. Such insights aid managers in optimizing capital structures amid economic volatility.