# Market Risk and Financial Performance of Non-Financial Companies Listed on the Moroccan Stock Exchange

^{1}

^{2}

^{*}

## Abstract

**:**

## 1. Introduction

## 2. Literature Review and Testable Hypotheses

#### 2.1. Book-to-Market Ratio

#### 2.2. Degree of Financial Leverage

#### 2.3. Gearing Ratio

#### 2.4. Firm’s Age

#### 2.5. Cash Holding Ratio

#### 2.6. Debt-to-Income Ratio

#### 2.7. Debt-to-Assets Ratio

#### 2.8. Firm Size

#### 2.9. Tangibility Ratio

#### 2.10. Stock Turnover

**Hypothesis 1**

**(H**

_{1}):**Hypothesis 2**

**(H**

_{2}):**Hypothesis 3**

**(H**

_{3}):## 3. Data and Methodology

#### 3.1. Data and Sample

#### 3.2. Description of Variables

#### 3.3. Model Specification and Empirical Procedures

#### 3.3.1. Model Specification

_{0}, δ

_{0}, and ϕ

_{0}are the constant terms whereas β

_{i}, δ

_{i}, and ϕ

_{i}are the coefficients of the independent variables. α

_{i}is the firm i specific effect and ε

_{it}is the error term at time t in each model that is assumed to follow a normal distribution.

_{it}

_{−1}, ROE

_{it}

_{−1}, and PROF

_{it}

_{−1}are the one period lagged dependent variables for firm i at year t − 1, and γ

_{1}, θ

_{1}and λ

_{1}their coefficients, respectively; γ

_{0}, θ

_{0}, and λ

_{0}are the constant terms whereas γ

_{i}, θ

_{i}, and λ

_{i}(for i different from 0 and 1) are the coefficients of the independent variables. α

_{i}is the firm i specific effect and ε

_{it}is the error term at time t in each model that is assumed to follow a normal distribution.

#### 3.3.2. Empirical Procedures

_{0}) of non-stationary variables against the alternative hypothesis of stationary variables.

_{i}) are equal to zero, i.e., the pooled OLS model (POLS) is the most convenient. The alternative hypothesis indicates that the fixed effects model is better. The Hausman test is used to select the appropriate and efficient model between the random effects model and the fixed effects model. The null hypothesis of this test assumes that the random effects model is the most efficient model, but the alternative hypothesis is that the fixed effects model is the most appropriate model. The Breusch and Pagan Lagrangian multiplier (LM test) examines whether random effects exist or not. The LM test is implemented under the null hypothesis that the variance of the specific effects (Var(α

_{i})) is equal to zero, i.e., the POLS is the most suitable model. The alternative hypothesis indicates that the random effects model is better. The selected model (the pooled OLS, fixed or random effects model) from these tests is then estimated and reported with robust standard errors for autocorrelation and heteroscedasticity within panel units. The interpretations of the results are based on the selected model.

## 4. Empirical Results and Discussion

#### 4.1. Descriptive Statistics

#### 4.2. Correlation Analysis

#### 4.3. Unit Root Analysis

#### 4.4. Results of the Regression Analysis

#### 4.5. Results of the Dynamic Panel Models

_{1}), (H

_{2}) and (H

_{3}), and the results are in line with those of Gatsi et al. (2013) and Muriithi et al. (2016), among others.

## 5. Conclusions and Recommendations

_{1}), the return on equity (Hypothesis 2, H

_{2}) and the profit margin (Hypothesis 3, H

_{3}) of the non-financial firms listed in the CSE. These findings are consistent with previous empirical studies by Gatsi et al. (2013) and Muriithi et al. (2016), among others. Most of the results of the different models suggested that the firm’s age, the cash holdings ratio, the firm’s size, the debt-to-assets ratio, and the tangibility ratio had a positive effect on financial performance, whereas the debt-to-income ratio and the stock turnover hurt the performance of these non-financial firms. Therefore, decision-makers and managers of these companies should mitigate market risk by using appropriate risk management strategies through derivatives, forwards, futures, swaps, options, and insurance as well as securitization techniques. The relatively small size of the sample and the priority given to non-financial firms due to the availability of data are the main limitations of this study. Future research could investigate the effects of other types of risks on financial performance by using several countries and an extended sample period. Finally, various econometric procedures such as cointegration and causality analysis could be used to assess the relationship between risk management and financial performance better.

## Author Contributions

## Funding

## Conflicts of Interest

## Appendix A

Variables | Symbol | Definition | Formula | Expected Sign | Empirical Studies |
---|---|---|---|---|---|

Dependent variable | |||||

Return on assets | ROA | The ratio of a company’s net income to the average of its total assets. | $ROA=\frac{Netincome}{averageoftotalassets}$ | + | Yao et al. (2018) |

Return on Equity | ROE | It is the ratio of the firm’s net income to the average of its shareholders’ equity. | $ROE=\frac{Netincome}{averageoftotalequity}$ | + | (Muriithi et al. 2016) |

Profit margin | PROF | The amount of net income (profits) earned with each dollar of sales realized. | $PROF=\frac{Netincome}{Netsales}$ | + | Yao et al. (2018) |

Independent variables | |||||

Market risk | |||||

The degree of financial leverage | DFL | The ratio of earnings before interest and taxes (EBIT) to earnings before taxes | $DFL=\frac{EBIT}{(EBIT-Interest\mathrm{exp}enses)}$ | - | Gatsi et al. (2013) Muriithi et al. (2016) |

Book to market ratio | BMR | The book-to-market ratio is used to find the value of a company by comparing the book value of a firm to its market value. | $BMR=\frac{Bookvalue}{Marketvalue}$ | - | Chen et al. (2005) |

Gearing ratio | GEAR | It indicates a financial ratio that compares the borrowed funds to the owner’s equity. | $GEAR=\frac{Totaldebts}{Equity}$ | - | Linsley and Shrives (2006) Enekwe et al. (2014) |

Control variables | |||||

Firm Age | AGE | Difference between the last year of the study period and the firm’s year of establishment | $AGE=Yea{r}_{t}-Establishmentdate$ | + | Ilaboya and Ohiokha (2016) |

Cash holdings ratio | CASH | Cash and Cash equivalents divided by total assets | $CASH=(\frac{Cashandcashequivalents}{Totalassets})$ | + | Akinyomi (2014) Aiyegbusi and Akinlo (2016) |

Debt to income ratio | DIR | The ratio of debt to income | $DIR=\frac{Debts}{Income}$ | - | Demyanyk et al. (2011) Brown et al. (2015) |

Debt-to-assets ratio | LEV | Total debts divided by total assets | $LEV=(\frac{Totaldebts}{Totalassets})$ | - | Le and Phan (2017) Amraoui et al. (2018) |

Firm size | SIZE | The natural logarithm of total assets | $SIZE=Ln(Totalassets)$ | - | Goddard et al. (2005) Amraoui et al. (2018) |

Tangibility ratio | TANG | Tangible fixed assets divided by total assets | $TANG=(\frac{Fixedassets}{Totalassets})$ | - | Vătavu (2015) Razaq and Akinlo (2017) |

Turnover | TURN | Stock turnover | $TURN=\frac{Costofsales}{Averagestock}$ | + | Salawati (2012) Nawaz et al. (2016) |

Number | Company Name | Establishment (Year) | Listing (Year) |
---|---|---|---|

01 | DOUJA PROMOTION GROUPE ADDOHA SA | 1988 | 2006 |

02 | LYONNAISE DES EAUX DE CASABLANCA SA | 1995 | 2005 |

03 | CENTRALE DANONE SA | 1959 | 1974 |

04 | LABEL VIE SA | 1985 | 2008 |

05 | SOCIETE ALUMINIUM DU MAROC SA | 1976 | 1998 |

06 | CARTIER SAADA SA | 1947 | 2006 |

07 | IB MAROC.COM SA | 1994 | 2001 |

08 | SOCIETE MAGHREBINE DE MONETIQUE SA | 1983 | 2011 |

09 | STOKVIS NORD-AFRIQUE SA | 1950 | 2007 |

10 | MICRODATA SA | 1991 | 2007 |

11 | HIGH TECH PAYMENT SYSTEMS SA | 1995 | 2006 |

12 | FENIE BROSSETTE SA | 1962 | 2006 |

13 | DARI COUSPATE SA | 1994 | 2005 |

14 | COLORADO SA | 1957 | 2006 |

15 | COMPAGNIE DE TRANSPORTS AU MAROC SA | 1919 | 1993 |

16 | DELATTRE LEVIVIER MAROC SA | 1959 | 2008 |

17 | SOCIETE DE REALISATIONS MECANIQUES SA | 1949 | 2006 |

18 | MAGHREB OXYGENE SA | 1977 | 1999 |

19 | INVOLYS SA | 1986 | 2006 |

20 | STROC INDUSTRIE SA | 1989 | 2008 |

21 | SOCIETE NATIONALE D ELECTROLYSE ET DE PETROCHIMIE SA | 1973 | 2007 |

22 | SOCIETE DES BRASSERIES DU MAROC SA | 1919 | 2002 |

23 | DELTA HOLDING SA | 1999 | 2008 |

24 | SOCIETE NATIONALE DE SIDERURGIE SA | 1984 | 1996 |

25 | SOCIETE LESIEUR CRISTAL SA | 1940 | 1972 |

26 | SOCIETE AUTO-HALL SA | 1920 | 1941 |

27 | MANAGEM SA | 1930 | 2007 |

28 | LAFARGEHOLCIM MAROC SA | 1981 | 1997 |

29 | SOCIETE LES CIMENTS DU MAROC SA | 1957 | 1969 |

30 | SOCIETE ANONYME MAROCAINE DE L’INDUSTRIE DU RAFFINAGE SA | 1959 | 1996 |

31 | MAROC TELECOM SA | 1998 | 2004 |

Variables | (b) FE | (B) RE | (b − B) Difference | Sqrt (diag(V_b − V_B)) S.E |
---|---|---|---|---|

∆lDFL | −0.448 *** (0.108) | −0.381 *** (0.091) | −0.067 | 0.060 |

∆lBMR | −0.246 *** (0.081) | −0.212 *** (0.070) | −0.034 | 0.041 |

∆lGEAR | −0.062 ** (0.029) | −0.064 ** (0.027) | 0.002 | 0.011 |

∆lAGE | 2.878 (3.193) −0.001 | 0.602 (1.021) | 2.276 | 3.068 |

∆lCASH | (0.021) | 0.005 (0.019) | −0.006 | 0.009 |

∆lDIR | −0.436 *** (0.047) | −0.404 *** (0.040) | −0.032 | 0.025 |

∆lLEV | 0.368 * (0.211) | 0.231 (0.192) | 0.137 | 0.092 |

∆SIZE | 0.076 (0.203) | 0.184 (0.182) | −0.108 | 0.096 |

∆lTANG | 0.112 (0.090) | 0.120 (0.083) | −0.008 | 0.037 |

∆lTURN | −0.106 (0.084) | −0.078 (0.083) | −0.028 | 0.018 |

Constant | −0.138 (0.109) | −0.067 (0.042) | ||

R-squared | 0.632 | 0.647 | ||

F-stat./Wald chi2(10) | 21.940 *** | 245.590 *** | ||

Hausman test chi2(10) | [11.300] | |||

Prob > chi2 | - | - | - | 0.334 |

Variables | (b) FE | (B) RE | (b−B) Difference | Sqrt (diag(V_b−V_B)) S.E |
---|---|---|---|---|

∆lDFL | −0.426 *** (0.109) | −0.308 *** (0.092) | −0.118 | 0.062 |

∆lBMR | −0.231 *** (0.082) | −0.236 *** (0.071) | 0.005 | 0.043 |

∆lGEAR | −0.048 (0.029) | −0.050 * (0.027) | 0.002 | 0.012 |

∆lAGE | 2.324 (3.247) | 0.777 (1.011) | 1.547 | 3.158 |

∆lCASH | −0.003 (0.021) | 0.002 (0.019) | −0.005 | 0.009 |

∆lDIR | −0.396 *** (0.047) | −0.389 *** (0.041) | −0.007 | 0.026 |

∆lLEV | 0.895 *** (0.214) | 0.812 *** (0.196) | 0.082 | 0.097 |

∆SIZE | 0.093 (0.206) | 0.167 (0.185) | −0.073 | 0.101 |

∆lTANG | 0.055 (0.092) | 0.067 (0.085) | −0.012 | 0.040 |

∆lTURN | −0.139 (0.086) | −0.097 (0.085) | −0.042 | 0.019 |

Constant | −0.124 (0.111) | −0.077 (0.042) | ||

R-squared | 0.563 | 0.573 | ||

F-stat./Wald chi2(10) | 15.690 *** | 177.750 *** | ||

Hausman test chi2(10) | [12.920] | |||

Prob > chi2 | - | - | - | 0.228 |

Variables | (b) FE | (B) RE | (b−B) Difference | Sqrt (diag(V_b−V_B)) S.E |
---|---|---|---|---|

∆lDFL | −0.399 *** (0.105) | −0.299 *** (0.087) | −0.100 | 0.061 |

∆lBMR | −0.195 ** (0.078) | −0.162 ** (0.067) | −0.032 | 0.043 |

∆lGEAR | −0.070 ** (0.028) | −0.059 ** (0.026) | −0.011 | 0.012 |

∆lAGE | −0.109 (3.108) | 0.721 (0.873) | −0.830 | 3.032 |

∆lCASH | 0.012 (0.020) | 0.008 (0.018) | 0.004 | 0.009 |

∆lDIR | −0.418 *** (0.045) | −0.390 *** (0.038) | −0.028 | 0.026 |

∆lLEV | 0.326 (0.205) | 0.197 (0.183) | 0.128 | 0.099 |

∆SIZE | 0.315 (0.198) | 0.374 ** (0.172) | −0.058 | 0.103 |

∆lTANG | 0.148 * (0.088) | 0.120 (0.079) | 0.027 | 0.041 |

∆lTURN | −0.110 (0.082) | −0.086 (0.081) | −0.024 | 0.020 |

Constant | −0.042 (0.106) | −0.071 ** (0.036) | ||

R-squared | 0.623 | 0.629 | ||

F-stat./Wald chi2(10) | 20.710 *** | 228.050 *** | ||

Hausman test chi2(10) | [13.080] | |||

Prob > chi2 | - | - | - | 0.219 |

## Appendix B

Variables | Model 1: ∆lROA | Model 1: ∆lROA | Model 1: ∆lROA | Model 1: ∆lROA | Model 1: ∆lROA | Model 1: ∆lROA |
---|---|---|---|---|---|---|

FE | RE | FE | RE | POLS | RE | |

∆lDFL | −0.666 *** (0.088) | −0.691 *** (0.083) | ||||

∆lBMR | −0.307 *** (0.077) | −0.298 *** (0.070) | ||||

∆lGEAR | −0.054 (0.033) | −0.057 * (0.033) | ||||

∆lAGE | 0.575 (0.928) | 0.476 (0.607) | 4.988 (3.448) | 1.166 (0.961) | 0.357 (0.583) | 0.349 (0.658) |

∆lCASH | −0.031 * (0.017) | −0.027 (0.016) | 0.007 (0.020) | 0.017 (0.019) | −0.036 * (0.019) | −0.037 * (0.019) |

∆lDIR | −0.376 *** (0.042) | −0.342 *** (0.039) | −0.509 *** (0.039) | −0.485 *** (0.037) | −0.462 *** (0.042) | −0.467 *** (0.042) |

∆lLEV | 0.241 * (0.140) | 0.123 (0.132) | 0.085 (0.168) | 0.015 (0.160) | 0.355 ** (0.163) | 0.385 ** (0.162) |

∆SIZE | 0.294 ** (0.126) | 0.331 *** (0.119) | 0.208 (0.202) | 0.319 * (0.176) | 0.597 *** (0.125) | 0.590 *** (0.124) |

∆lTANG | 0.029 (0.072) | 0.037 (0.066) | −0.103 (0.085) | −0.037 (0.077) | 0.202 ** (0.077) | 0.205 *** (0.077) |

∆lTURN | 0.142 * (0.083) | 0.156 * (0.081) | −0.053 (0.085) | −0.052 (0.083) | 0.153 * (0.083) | 0.148 * (0.082) |

Constant | −0.065 (0.042) | −0.063 * (0.036) | −0.173 (0.109) | −0.058 (0.038) | −0.112 *** (0.034) | −0.119 *** (0.039) |

R-squared | 0.530 | 0.534 | 0.526 | 0.561 | 0.401 | 0.423 |

F-stat./Wald | 31.770 *** | 262.740 *** | 27.870 *** | 245.360 *** | 19.350 *** | 159.920 *** |

Chow test | 1.26 | 0.94 | 2.13 *** | |||

LM test | 0.47 | 0.00 | 0.00 | |||

Hausman test | 9.71 | 8.50 | [358.67 ***] | |||

Conclusion | POLS | POLS | FE |

_{0}) assumes that the individual effect u

_{i}is equal to zero, i.e., the pooled OLS model (POLS) is preferred, whereas the alternative hypothesis indicates that the fixed effects model is better. The LM test is the Breusch and Pagan (1980) Lagrangian multiplier examining whether random effects exist or not. The null hypothesis (H

_{0}) assumes that the individual-specific error variance (Var(u)) is zero, i.e., the pooled OLS model (POLS) is preferred, whereas the alternative hypothesis indicates that the random effect model is the most suitable model to be chosen. The Hausman (1978) test helps to select the best model between the fixed effect model and the random effect model. The null hypothesis is that the random effect model is the most efficient and appropriate than the fixed effect model. The numbers in parentheses and brackets are the standard errors and the statistics of Hausman tests. *** p < 0.01, ** p < 0.05 and * p < 0.1.

Variables | Model 2: ∆lROE | Model 2: ∆lROE | Model 2: ∆lROE | Model 2: ∆lROE | Model 2: ∆lROE | Model 2: ∆lROE |
---|---|---|---|---|---|---|

FE | RE | FE | RE | POLS | RE | |

∆lDFL | −0.670 *** (0.090) | −0.662 *** (0.085) | ||||

∆lBMR | −0.331 *** (0.077) | −0.322 *** (0.069) | ||||

∆lGEAR | −0.049 (0.034) | −0.053 (0.034) | ||||

∆lAGE | 0.260 (0.948) | 0.348 (0.661) | 3.355 (3.437) | 1.168 (0.952) | 0.290 (0.293) | 0.227 (0.682) |

∆lCASH | −0.024 (0.017) | −0.017 (0.017) | 0.008 (0.020) | 0.016 (0.019) | −0.026 (0.019) | −0.027 (0.019) |

∆lDIR | −0.346 *** (0.043) | −0.337 *** (0.040) | −0.491 *** (0.039) | −0.473 *** (0.037) | −0.464 *** (0.043) | −0.470 *** (0.042) |

∆lLEV | 0.781 *** (0.143) | 0.744 *** (0.135) | 0.581 *** (0.168) | 0.540 *** (0.159) | 1.037 *** (0.166) | 1.065 *** (0.165) |

∆SIZE | 0.309 ** (0.128) | 0.309 ** (0.122) | 0.255 (0.202) | 0.340 * (0.175) | 0.593 *** (0.127) | 0.592 *** (0.126) |

∆lTANG | 0.014 (0.073) | 0.033 (0.068) | −0.154 * (0.084) | −0.079 (0.076) | 0.204 ** (0.079) | 0.208 *** (0.079) |

∆lTURN | 0.135 (0.085) | 0.138 * (0.083) | −0.064 (0.085) | −0.057 (0.082) | 0.123 (0.084) | 0.115 (0.084) |

Constant | −0.052 (0.043) | −0.060 (0.040) | −0.123 (0.109) | −0.060 (0.037) | −0.105 *** (0.034) | −0.110 *** (0.041) |

R-squared | 0.490 | 0.491 | 0.509 | 0.524 | 0.412 | 0.412 |

F-stat./Wald | 26.730 *** | 224.160 *** | 23.650 *** | 211.320 *** | 18.510 *** | 152.290 *** |

Chow test | 1.36 | 0.85 | 1.65 ** | |||

LM test | 0.23 | 0.00 | 0.17 | |||

Hausman test | 7.85 | 7.66 | 16.59 ** | |||

Conclusion | POLS | POLS | FE |

Variables | Model 3: ∆lPROF | Model 3: ∆lPROF | Model 3: ∆lPROF | Model 3: ∆lPROF | Model 3: ∆lPROF | Model 3: ∆lPROF |
---|---|---|---|---|---|---|

POLS | RE | FE | RE | POLS | RE | |

∆lDFL | −0.611 *** (0.077) | −0.614 *** (0.077) | ||||

∆lBMR | −0.288 *** (0.079) | −0.247 *** (0.071) | ||||

∆lGEAR | −0.032 (0.034) | −0.036 (0.033) | ||||

∆lAGE | 0.495 (0.506) | 0.455 (0.616) | 3.525 (3.541) | 1.401 (0.976) | 0.591 (0.590) | 0.524 (0.668) |

∆lCASH | −0.012 (0.015) | −0.015 (0.015) | 0.023 (0.020) | 0.030 (0.020) | −0.012 (0.019) | −0.013 (0.019) |

∆lDIR | −0.314 *** (0.036) | −0.319 *** (0.036) | −0.474 *** (0.040) | −0.460 *** (0.038) | −0.438 *** (0.042) | −0.442 *** (0.042) |

∆lLEV | −0.052 (0.123) | −0.020 (0.121) | 0.109 (0.173) | 0.048 (0.163) | 0.206 (0.165) | 0.238 (0.164) |

∆SIZE | 0.533 *** (0.110) | 0.531 *** (0.110) | 0.319 (0.208) | 0.387 ** (0.179) | 0.712 *** (0.126) | 0.707 *** (0.126) |

∆lTANG | 0.031 (0.061) | 0.017 (0.061) | −0.082 (0.087) | −0.045 (0.078) | 0.156 ** (0.078) | 0.162 ** (0.079) |

∆lTURN | 0.021 (0.029) | 0.023 (0.074) | −0.320 *** (0.088) | −0.330 *** (0.084) | −0.128 (0.084) | −0.127 (0.083) |

Constant | −0067 ** (0.029) | −0.069 * (0.038) | −0.144 (0.112) | −0.079 ** (0.038) | −0.124 *** (0.034) | −0.130 *** (0.040) |

R-squared | 0.529 | 0.529 | 0.511 | 0.523 | 0.378 | 0.378 |

F-stat./Wald | 31.830 *** | 264.480 *** | 23.170 *** | 211.070 *** | 16.060 *** | 131.130 *** |

Chow test | 1.74 ** | 0.78 | 2.38 *** | |||

LM test | 0.14 | 0.00 | 0.05 | |||

Hausman test | 14.32 * | 6.21 | 31.10 *** | |||

Conclusion | FE | POLS | FE |

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1 | 2017 Annual Report of the Casablanca Stock Exchange. |

2 | AMMC: Autorite Marocaine du Marche des Capitaux. |

3 | MAROCLEAR: Central Depository of securities in Morocco. |

4 | APSB: Association Professionnelle des Societes de Bourse. |

Variables | Obs. | Mean | Std.Dev | Min | Max |
---|---|---|---|---|---|

Panel A: Performance variables | |||||

∆lROA | 341 | −0.045 | 0.579 | −4.730 | 3.367 |

∆lROE | 341 | −0.030 | 0.580 | −4.579 | 3.338 |

∆lPROF | 340 | −0.053 | 0.562 | −4.509 | 3.082 |

Panel B: Market risk variables | |||||

∆lDFL | 316 | 0.009 | 0.511 | −3.258 | 3.010 |

∆lBMR | 293 | −0.018 | 0.363 | −1.236 | 1.521 |

∆lGEAR | 327 | 0.082 | 0.853 | −4.600 | 4.019 |

Panel C: Control variables | |||||

∆lAGE | 496 | 0.044 | 0.052 | 0.010 | 0.693 |

∆lCASH | 378 | 0.010 | 1.322 | −4.772 | 8.975 |

∆lDIR | 285 | 0.027 | 0.671 | −2.343 | 3.759 |

∆lLEV | 381 | 0.016 | 0.183 | −0.781 | 1.116 |

∆SIZE | 383 | 0.010 | 0.248 | −1.166 | 1.894 |

∆lTANG | 356 | −1.834 | 1.461 | −5.805 | 0.520 |

∆lTURN | 375 | 0.000 | 0.327 | −1.770 | 1.800 |

Variables | (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | (12) | (13) |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|

(1) ∆lROA | 1.000 | ||||||||||||

(2) ∆lROE | 0.938 *** | 1.000 | |||||||||||

(3) ∆lPROF | 0.963 *** | 0.918 *** | 1.000 | ||||||||||

(4) ∆lDFL | −0.540 *** | −0.490 *** | −0.499 *** | 1.000 | |||||||||

(5) ∆lBMR | −0.212 ** | −0.253 *** | −0.172 ** | 0.240 *** | 1.000 | ||||||||

(6) ∆lGEAR | −0.203 ** | −0.090 | −0.195 ** | 0.093 | −0.012 | 1.000 | |||||||

(7) ∆lAGE | 0.138 * | 0.120 | 0.148 * | −0.006 | 0.059 * | −0.133 | 1.000 | ||||||

(8) ∆lCASH | 0.061 | 0.075 | 0.072 | −0.025 | −0.044 | −0.021 | 0.006 | 1.000 | |||||

(9) ∆lDIR | −0.721 *** | −0.615 *** | −0.721 *** | 0.398 *** | −0.016 | 0.127 | −0.142 * | −0.039 | 1.000 | ||||

(10) ∆lLEV | −0.303 *** | −0.052 | −0.282 *** | 0.141 * | −0.069 | 0.399 *** | −0.109 | 0.098 | 0.477 *** | 1.000 | |||

(11) ∆SIZE | −0.151 * | −0.035 | −0.084 | 0.096 | 0.068 | 0.116 | −0.083 | 0.072 | 0.258 *** | 0.456 *** | 1.000 | ||

(12) ∆lTANG | −0.105 | −0.101 | −0.119 | −0.063 | −0.003 | 0.101 | −0.398 *** | 0.025 | 0.090 | 0.083 | 0.065 | 1.000 | |

(13) ∆lTURN | 0.030 | 0.006 | 0.015 | −0.063 | −0.053 | 0.027 | 0.017 | 0.179 ** | −0.085 | −0.033 | −0.069 | −0.110 | 1.000 |

Variables | Im, Pesaran and Shin W-Stat, (IPS) | Augmented Dickey-Fuller Fisher Chi-Square, (ADF) | Phillips-Perron Fisher Chi-Square, (PP) | Levin, Lin and Chu t-Stat, (LLC) | ||||
---|---|---|---|---|---|---|---|---|

H_{0}: I(0) | H_{0}: I(1) | H_{0}: I(0) | H_{0}: I(1) | H_{0}: I(0) | H_{0}: I(1) | H_{0}: I(0) | H_{0}: I(1) | |

Financial Performance | ||||||||

lROA | −1.827 ** | −6.678 *** | 102.262 *** | 169.017 *** | 82.704 ** | 239.394 *** | −5.262 *** | −9.499 *** |

lROE | −2.247 *** | −9.923 *** | 100.922 *** | 210.253 *** | 100.273 *** | 270.493 *** | −3.090 *** | −9.202 *** |

lPROF | −2.438 ** | −7.463 *** | 111.423 *** | 186.650 *** | 86.348 *** | 235.912 *** | −8.210 *** | −12.297 *** |

Market risk | ||||||||

lDFL | −4.444 *** | −7.550 *** | 124.535 *** | 207.259 *** | 131.551 *** | 246.652 *** | −19.981 *** | −12.416 *** |

lBMR | −3.004 *** | −7.786 *** | 91.901 *** | 168.881 *** | 97.482 *** | 193.562 *** | −5.268 *** | −10.443 *** |

lGEAR | −2.268 ** | −11.186 *** | 93.029 *** | 236.791 *** | 83.141 ** | 291.213 *** | −7.128 *** | −19.965 *** |

Control variables | ||||||||

lAGE | −15.601 *** | −43.526 *** | 49.080 *** | 134.968 *** | 74.215 *** | 140.577 *** | 20.413 | 3.500 |

lCASH | −5.438 *** | −15.228 *** | 136.913 *** | 322.223 *** | 137.263 *** | 404.668 *** | −7.279 *** | −22.226 *** |

lDIR | −1.825 ** | −55.734 *** | 89.926 *** | 149.758 *** | 73.014 ** | 195.840 *** | −9.368 *** | −135.944 *** |

lLEV | −1.577 * | −10.945 *** | 73.558 | 238.801 *** | 63.273 | 274.749 *** | −3.827 *** | −21.733 *** |

SIZE | 0.924 | −9.373 *** | 71.595 | 205.034 *** | 66.469 | 202.360 *** | −3.494 *** | −13.190 *** |

lTANG | 0.384 | −8.484 *** | 50.479 | 181.955 *** | 44.906 | 222.370 *** | −2.969 *** | −14.412 *** |

lTURN | −4.234 *** | −12.334 *** | 124.004 *** | 273.907 *** | 125.525 *** | 400.165 *** | −6.118 *** | −18.300 *** |

_{0}: I(0) assumes a unit root process at the level, whereas H

_{0}: I(1) supposes a unit root process at the first difference. *** p < 0.01, ** p < 0.05 and * p < 0.1.

Variables | (I) (Model 1: ∆lROA) POLS (Robust) | (II) (Model 2: ∆lROE) POLS (Robust) | (III) (Model 3: ∆lPROF) POLS (Robust) |
---|---|---|---|

∆lDFL ∆lBMR ∆lGEAR | −0.383 * (0.198) −0.205 ** (0.085) −0.064 (0.039) | −0.308 (0.187) −0.236 *** (0.080) −0.050 (0.039) | −0.299 (0.246) −0.162 ** (0.075) −0.059 * (0.033) |

∆lAGE ∆lCASH ∆lDIR | 0.619 (1.079) 0.006 (0.018) −0.397 *** (0.059) | 0.828 (1.113) 0.002 (0.017) −0.386 *** (0.055) | 0.721 (0.908) 0.008 (0.015) −0.390 *** (0.062) |

∆lLEV ∆SIZE ∆lTANG | 0.211 (0.197) 0.186 (0.165) 0.116 (0.086) | 0.806 *** (0.258) 0.164 (0.196) 0.064 (0.087) | 0.197 (0.180) 0.374 ** (0.153) 0.120 * (0.066) |

∆lTURN | −0.075 (0.084) | −0.093 (0.079) | −0.086 (0.077) |

Constant | −0.064 (0.041) | −0.077 * (0.045) | −0.071 * (0.038) |

R-squared F-stat./Wald chi2(10) | 0.647 15.310 *** | 0.573 11.450 *** | 0.629 12.300 *** |

W_{MR} | 5.590 *** | 5.500 *** | 4.220 *** |

Diagnostics | |||

Chow test | 1.35 | 1.39 | 1.18 |

LM test | 0.61 | 0.78 | 0.00 |

Hausman test | 11.30 | 12.92 | 13.08 |

_{MR}is the Wald test examining whether the proxies of market risk jointly influence the variables of financial performance significantly. The numbers in parentheses are the robust standard errors. *** p < 0.01, ** p < 0.05 and * p < 0.1. The detailed descriptions of the Chow test, LM test, and Hausman test are presented in the Section 3.3.1.

**Table 5.**Robustness using a single measure of market risk with Driscoll and Kraay’s standard errors.

Variables | (A) (Model 1: ∆lROA) POLS | (B) (Model 1: ∆lROA) POLS | (C) (Model 1: ∆lROA) FE | (D) (Model 2: ∆lROE) POLS | (E) (Model 2: ∆lROE) POLS | (F) (Model 2: ∆lROE) FE | (G) (Model 3: ∆lPROF) FE | (H) (Model 3: ∆lPROF) POLS | (I) (Model 3: ∆lPROF) FE |
---|---|---|---|---|---|---|---|---|---|

∆lDFL | −0.694 *** (0.158) | −0.659 *** (0.165) | −0.592 *** (0.131) | ||||||

∆lBMR | −0.298 *** (0.049) | −0.322 *** (0.051) | −0.247 *** (0.060) | ||||||

∆lGEAR | −0.099 *** (0.029) | −0.088 *** (0.028) | −0.085 *** (0.023) | ||||||

∆lAGE | 0.453 (0.321) | 1.166 (0.687) | 0.104 (0.387) | 0.392 (0.304) | 1.168 * (0.598) | −0.090 (0.339) | 0.380 (0.468) | 1.401 * (0.668) | 0.030 (0.460) |

∆lCASH | −0.025 *** (0.007) | 0.017 (0.013) | −0.039 *** (0.011) | −0.013 (0.012) | 0.016 * (0.009) | −0.032 ** (0.011) | −0.016 * (0.008) | 0.030 ** (0.010) | −0.012 (0.010) |

∆lDIR | −0.338 *** (0.101) | −0.485 *** (0.114) | −0.526 *** (0.111) | −0.334 *** (0.099) | −0.473 *** (0.109) | −0.512 *** (0.113) | −0.355 *** (0.099) | −0.460 *** (0.100) | −0.511 *** (0.097) |

∆lLEV | 0.109 (0.135) | 0.015 (0.082) | 0.722 *** (0.221) | 0.736 ** (0.266) | 0.540 ** (0.188) | 1.313 *** (0.355) | 0.109 (0.193) | 0.048 (0.122) | 0.642 ** (0.217) |

∆SIZE | 0.334 ** (0.138) | 0.319 (0.196) | 0.535 *** (0.146) | 0.306 * (0.159) | 0.340 ** (0.136) | 0.567 *** (0.146) | 0.487 *** (0.073) | 0.387 ** (0.161) | 0.653 *** (0.114) |

∆lTANG | 0.048 (0.086) | −0.037 (0.041) | 0.286 (0.201) | 0.047 (0.092) | −0.079 ** (0.035) | 0.262 (0.214) | 0.040 (0.053) | −0.045 (0.048) | 0.283 (0.171) |

∆lTURN | 0.154 * (0.087) | −0.052 (0.031) | 0.098 ** (0.037) | 0.136 * (0.077) | −0.057 * (0.032) | 0.071 * (0.035) | −0.003 (0.077) | −0.330 *** (0.094) | −0.172 * (0.084) |

Constant | −0.061 *** (0.013) | −0.058 * (0.028) | −0.107 *** (0.035) | −0.060 *** (0.014) | −0.060 * (0.027) | −0.094 ** (0.032) | −0.064 *** (0.016) | −0.079 * (0.039) | −0.112 ** (0.040) |

R-squared | 0.534 | 0.561 | 0.503 | 0.491 | 0.524 | 0.464 | 0.573 | 0.523 | 0.471 |

F-stat. | 165.630 *** | 350.600 *** | 98.930 *** | 67.650 *** | 475.610 *** | 46.200 *** | 353.420 *** | 124.620 *** | 135.400 *** |

Chow test | 1.26 | 0.94 | 2.13 *** | 1.36 | 0.85 | 1.65 ** | 1.74 ** | 0.78 | 2.38 *** |

LM test | 0.47 | 0.00 | 0.00 | 0.23 | 0.00 | 0.17 | 0.14 | 0.00 | 0.05 |

Hausman test | 9.71 | 8.50 | 358.670 *** | 7.85 | 7.66 | 16.59 ** | 14.32 * | 6.21 | 31.10 *** |

Variables | (I): POLS (Model 1: ∆lROA) DK (Robust Std.) | (II): POLS (Model 2: ∆lROE) DK (Robust Std.) | (III): POLS (Model 3: ∆lPROF) DK (Robust Std.) |
---|---|---|---|

∆lDFL | −0.383 * (0.193) | −0.308 (0.187) | −0.299 (0.240) |

∆lBMR | −0.205 *** (0.028) | −0.236 *** (0.027) | −0.162 ** (0.030) |

∆lGEAR | −0.064 *** (0.015) | −0.050 *** (0.013) | −0.059 *** (0.012) |

∆lAGE | 0.619 (0.693) | 0.828 (0.757) | 0.721 (0.530) |

∆lCASH | 0.006 (0.015) | 0.002 (0.010) | 0.008 (0.005) |

∆lDIR | −0.397 *** (0.119) | −0.386 *** (0.113) | −0.390 *** (0.124) |

∆lLEV | 0.211 (0.210) | 0.806 ** (0.350) | 0.197 (0.219) |

∆SIZE | 0.186 * (0.088) | 0.164 * (0.080) | 0.374 *** (0.108) |

∆lTANG | 0.116 (0.082) | 0.064 (0.073) | 0.120 * (0.079) |

∆lTURN | −0.075 * (0.038) | −0.093 ** (0.037) | −0.086 (0.065) |

Constant | −0.064 * (0.035) | −0.077 * (0.036) | −0.071 * (0.037) |

R-squared | 0.647 | 0.573 | 0.629 |

F-stat./Wald chi2(10) | 768.420 *** | 1031.840 *** | 204.030 *** |

W_{MR} | 36.090 *** | 50.230 *** | 18.640 *** |

Chow test | 1.35 | 1.39 | 1.18 |

LM test | 0.61 | 0.78 | 0.00 |

Hausman test | 11.30 | 12.92 | 13.08 |

_{MR}is the Wald test examining whether the proxies of market risk, i.e., ∆lDFL, ∆lBMR and ∆lGEAR jointly influence ∆lROA, ∆lROE and ∆lPROF significantly. The numbers in parentheses are the robust standard errors. *** p < 0.01, ** p < 0.05 and * p < 0.1.

Variables | (IV) (Model 4) Coeff. (Robust Std. Err.) | (V) (Model 5) Coeff. (Robust Std. Err.) | (VI) (Model 6) Coeff. (Robust Std. Err.) |
---|---|---|---|

L.∆lROA | −0.153 *** (0.036) | ||

L.∆lROE | −0.235 *** (0.058) | ||

L.∆lPROF | −0.146 *** (0.043) | ||

∆lDFL | −0.443 * (0.241) | −0.417 ** (0.217) | −0.450 (0.286) |

∆lBMR | −0.372 *** (0.109) | −0.340 *** (0.094) | −0.342 *** (0.115) |

∆lGEAR | −0.061 (0.055) | −0.045 (0.048) | −0.071 (0.048) |

∆lAGE | 10.410 (7.739) | 2.370 (4.977) | 9.046 (6.890) |

∆lCASH | −0.000 (0.016) | 0.001 (0.017) | 0.021 (0.013) |

∆lDIR | −0.473 *** (0.133) | −0.440 *** (0.122) | −0.454 *** (0.135) |

∆lLEV | 0.585 * (0.330) | 0.983 *** (0.315) | 0.535 * (0.294) |

∆SIZE | −0.091 (0.238) | 0.090 (0.208) | 0.171 (0.194) |

∆lTANG | 0.057 (0.105) | 0.055 (0.089) | 0.071 (0.125) |

∆lTURN | 0.017 (0.075) | −0.027 (0.059) | −0.012 (0.061) |

Constant | − | − | − |

F-stat. | 50.220 *** | 142.770 *** | 34.210 *** |

Hansen test | 10.750 | 13.120 | 12.030 |

AR(2) | 0.760 | −0.200 | −0.570 |

W_{MR} | 5.960 *** | 6.410 *** | 6.310 *** |

_{MR}is the Wald test examining whether the market risk proxies, i.e., ∆lDFL, ∆lBMR, and ∆lGEAR jointly influence ∆lROA, ∆lROE and ∆lPROF significantly. The numbers in parentheses are the robust standard errors. L.∆lROA = ∆lROA

_{it}

_{−1}; L.∆lROE = ∆lROE

_{it}

_{−1}and L.∆lPROF = ∆lPROF

_{it}

_{−1}*** p < 0.01, ** p < 0.05 and * p < 0.1.

Variables | (IV) (Model 4: ∆lROA) Coeff. (Robust Std. Err.) | (V) (Model 5: ∆lROE) Coeff. (Robust Std. Err.) | (VI) (Model 6: ∆lPROF) Coeff. (Robust Std. Err.) |
---|---|---|---|

L.∆lROA | −0.065 (0.051) | ||

L.∆lROE | −0.155 * (0.075) | ||

L.∆lPROF | −0.055 (0.048) | ||

∆lDFL | −0.461 * (0.267) | −0.417 (0.251) | −0.385 (0.340) |

∆lBMR | −0.246 ** (0.090) | −0.296 *** (0.081) | −0.186 ** (0.077) |

∆lGEAR | −0.020 (0.036) | −0.007 (0.036) | −0.033 (0.036) |

∆lAGE | −0.031 (1.362) | 0.289 (1.388) | 0.472 (1.062) |

∆lCASH | −0.001 (0.016) | −0.005 (0.016) | 0.002 (0.014) |

∆lDIR | −0.397 *** (0.085) | −0.389 *** (0.077) | −0.395 *** (0.086) |

∆lLEV | 0.145 (0.236) | 0.737 ** (0.271) | 0.172 (0.226) |

∆SIZE | 0.156 (0.168) | 0.148 (0.176) | 0.324 ** (0.152) |

∆lTANG | 0.050 (0.074) | −0.003 (0.068) | 0.072 (0.077) |

∆lTURN | −0.077 (0.070) | −0.092 (0.063) | −0.085 (0.069) |

Constant | −0.052 (0.046) | −0.065 (0.046) | −0.066 (0.038) |

F-stat. | 14.330 *** | 39.230 *** | 10.130 *** |

Hansen test | 8.910 | 8.250 | 9.060 |

AR(2) | 0.160 | −0.610 | −0.610 |

W_{MR} | 3.810 ** | 6.280 *** | 2.630 * |

© 2019 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).

## Share and Cite

**MDPI and ACS Style**

Kassi, D.F.; Rathnayake, D.N.; Louembe, P.A.; Ding, N.
Market Risk and Financial Performance of Non-Financial Companies Listed on the Moroccan Stock Exchange. *Risks* **2019**, *7*, 20.
https://doi.org/10.3390/risks7010020

**AMA Style**

Kassi DF, Rathnayake DN, Louembe PA, Ding N.
Market Risk and Financial Performance of Non-Financial Companies Listed on the Moroccan Stock Exchange. *Risks*. 2019; 7(1):20.
https://doi.org/10.3390/risks7010020

**Chicago/Turabian Style**

Kassi, Diby François, Dilesha Nawadali Rathnayake, Pierre Axel Louembe, and Ning Ding.
2019. "Market Risk and Financial Performance of Non-Financial Companies Listed on the Moroccan Stock Exchange" *Risks* 7, no. 1: 20.
https://doi.org/10.3390/risks7010020