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INTERNATIONAL JOURNAL OF ADVANCED RESEARCH IN COMMERCE, MANAGEMENT & SOCIAL SCIENCE (IJARCMSS) [ Vol. 9 | No. 3 (II) | July - September, 2026 ]

Identification of Drivers for Financial Performance using Du Pont Analysis-A Study on Indian Textile Industry

Mr. Soumendra Laha & Dr. Pradip Kumar Samanta

This study investigates the relative contribution of the three DuPont components — profit margin, asset turnover, and the equity multiplier — to Return on Equity (ROE), using a firm- and year-fixed-effects panel regression framework in the Indian textile industry. Drawing on a panel of firms observed over an extended multi-year period, with data sourced from Prowess and Bloomberg, the analysis controls for unobserved, time-invariant firm heterogeneity as well as common macroeconomic shocks by incorporating both firm and time fixed effects. The findings indicate that, among the three DuPont components, financial leverage, as captured by the equity multiplier, emerges as the only component with a statistically meaningful within-firm association with ROE, while profit margin and asset turnover do not show a comparable relationship. The model demonstrates strong explanatory power for within-firm variation in ROE. These results suggest that, within this sample, financial leverage is a more influential within-firm driver of ROE than operating profitability or asset-use efficiency. The study offers practical implications for analysts, investors, and managers, cautioning against interpreting a rising ROE as straightforward evidence of improved operating performance. Its primary contribution lies in applying a fixed-effects panel approach, rather than the simple or cross-sectional regressions common in prior DuPont literature, to isolate within-firm drivers of ROE.

Laha, S. & Samanta, P. (2026). Identification of Drivers for Financial Performance using Du Pont Analysis-A Study on Indian Textile Industry. International Journal of Advanced Research in Commerce, Management &Amp; Social Science, 09(03(II)), 189–195. https://doi.org/10.62823/IJARCMSS/9.3(II).9366
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DOI:

Article DOI: 10.62823/IJARCMSS/9.3(II).9366

DOI URL: https://doi.org/10.62823/IJARCMSS/9.3(II).9366

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