Internal determinants of financial performance: Evidence from Korean listed firms

This study examines the internal determinants of financial performance among firms listed on the Korean stock market. Using a comprehensive panel of 682 companies with 9,168 firm-year observations from 2012 to 2024, we analyze how firm size, liquidity, capital structure, profitability, and sales growth influence performance measured by return on assets (ROA) and return on equity (ROE). The findings reveal that all examined internal factors are positively and significantly associated with financial performance. Larger firms and those with stronger liquidity positions tend to achieve higher profitability, highlighting the importance of scale and prudent working capital management. A moderate use of debt is found to enhance performance, suggesting that an effective capital structure can generate tax and investment advantages. In addition, higher gross profit margins and stronger sales growth consistently improve both ROA and ROE, underscoring the role of operational efficiency and expansion strategies. This study contributes to the corporate governance and financial performance literature by providing updated and large-sample evidence from Korea, a major Asian market, and by jointly examining multiple internal governance-related financial indicators within a unified framework (Xu et al., 2019). The results offer practical implications for managers, investors, and policymakers seeking to enhance firm value through sound financial and governance decisions.