Asymmetric Effect of Return on Assets on the Profitability of Listed Firms on Tehran Stock Exchange Based on Variance Heteroscedasticity Model

The primary objective of this paper is to investigate the asymmetric effect of return on assets on the profitability of listed firms on Tehran Stock Exchange based on variance inequality model. This research aims to answer questions that how much the return on assets is effective on the profitability of companies based on the leveraging effect (symmetric or asymmetric)? The investigation is focused on all listed companies on Tehran Stock Exchange from 2014 to 2017 as a statistical population. The variance inequality model considered equations around the mean and around the variance and accordingly based on the around the mean equation with return on assets coefficient 0.32, company growth factor 0.56, capital structure factor 0.03 and the company size logarithmic coefficient 0.07, together have the positive effect on the profitability of petrochemical companies. Furthermore, results show that the depreciation tax shield cost with the coefficient of 6.16 has an adverse impact on those companies. Moreover, the results of the around the variance equation of asymmetric effect (leveraging effect) on the return on asset validates the profitability of petrochemical companies.