The firm-level determinants underlying the profitability in brokerage institutions: Some evidence from Turkey

Sampling the period of 2005- 2007 on a quarter basis, this paper made a comprehensive empirical investigation on identifying the firm-level determinants underlying the profitability in brokerage institutions operating in Turkey. We performed multiple regression and panel data analyses for a large array of brokerage institutions and observations. Two sets of dependent variables were built to control for profitability. The first regressed variable was the operating profitability of total assets and the second one was the pre-tax profitability of total assets. We found that, the balance sheet-based factors such as current trade receivables to total assets, financial assets to total assets and short-term liabilities to total assets significantly, robustly and commonly account for the brokerage houses' profitability. We also found that, the firm-level factors do better explain the changes in the profitability should the former ratio be proxied as a profitability indicator. Paper concludes with some concrete policy recommendations.