The impact of economic downturns on the profitability: Evidence from textile sector of Bangladesh

This study examines the impact of economic downturns of Bangladeshi-listed textile companies on the profitability. This paper uses panel data from the annual reports of 46 textile companies listed on the Dhaka Stock Exchange (DSE) in Bangladesh, comprising 230 observations for the period 2019–2023. The one-step system generalized method of moments (GMM) was used to analyse the relationship. The economic downturn was quantified using a categorical variable, assigning a value of 1 for periods experiencing economic downturns, and 0 otherwise, and profitability was measured using return on assets (ROA), return on equity (ROE), and earnings per share (EPS). The findings revealed that the profitability of Bangladeshi textile enterprises is adversely affected by economic downturns. These findings underscored that economic downturns pose a serious threat to Bangladeshi textile firms’ financial sustainability. The work enhances previous research and provides more reliable causal insights than static panel models by using GMM. The research findings will assist financial professionals, investors, and the government in making business decisions during economic recessions.