BALANCING PROFITABILITY AND GOVERNANCE: AN AGENCY THEORY APPROACH TO ROE AND KEY CORPORATE VARIABLES
Abstract
The study examines how important business characteristics affect Return on Equity (ROE) in China's automotive sector. It explores how financial leverage, business age, R&D intensity, environmental, social, and governance (ESG) practices, and total assets affect long-term profitability. This study takes a multi-theoretical approach, using agency theory, stakeholder theory, resource-based view, trade-off theory, and organizational life cycle theory to empirically analyze these variables' influence on ROE. The study focuses on a specific group of Chinese manufacturers and attempts to provide significant insights that help improve financial performance while aligning with long-term environmental goals. Focusing on a sample of Chinese businesses, the study aims to offer insightful information for enhancing financial performance while supporting long-term sustainability goals. Emphasizing the critical balance that needs to be struck, the findings provide investors, legislators, and corporate executives with vital counsel. In the end, our study helps the Chinese car sector respond to changing corporate sustainability norms by making well-informed decisions that improve resilience and encourage value development.
KEYWORDS: Return on Equity (ROE), Environmental, Social, and Governance (ESG), Financial leverage, Chinese automotive industry, corporate sustainability, Profitability
