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Article
Publication date: 10 January 2020

Inder Sekhar Yadav, Debasis Pahi and Phanindra Goyari

This paper aims to investigate the relationship between firm size and growth under the framework of Law of Proportionate Effect (LPE) for Asian firms.

Abstract

Purpose

This paper aims to investigate the relationship between firm size and growth under the framework of Law of Proportionate Effect (LPE) for Asian firms.

Design/methodology/approach

An unbalanced panel data for about 12,001 unique non-financial listed and active firms from 1995 to 2016 for 12 industrial and emerging Asian economies was examined. Total assets and net sales were used as size variables. Firm-specific variables such as return on equity, leverage and liquidity ratio were used along with macroeconomic variables such as GDP growth and two financial development indicators. The fixed effects and random effects approach were used to estimate the dynamic growth model after taking into account econometric issues such as correlation between the cross-country-specific error component and the regressors and heteroscedasticity.

Findings

The estimated coefficient of firm size was found to be always significant and negative rejecting the Gibrat’s law for Asian firms confirming that the small-sized firms are growing faster than larger-sized firms. Also, the persistence of growth coefficient suggested that a positive persistence of firm growth does not exist for the selected Asian firms. Gibrat’s LPE was also rejected across small, medium- and large-sized companies. For the aggregate sample, the coefficient of leverage was found to be negative and significant, whereas liquidity ratio, GDP growth, banking sector and stock market variables are found to have positive and significant relationship with growth of firms. For individual economies, a mix of positive and negative (significant and insignificant) estimated coefficient was observed.

Practical implications

At macro-level, the examination of firm growth is likely to have significant policy implications for the regulators and various government agencies as firm growth may increase economic activity in general and employment opportunities in particular. The policymakers can control economic and employment activity by designing specific firm growth policies. At micro-level, the study will have significant implications for managerial decision-making.

Originality/value

To the best of the authors’ knowledge, this is one of the first studies to test the validity of Gibrat’s LPE for large Asian economies and firms using recent data under a dynamic growth framework using firm-specific and macroeconomic variables. Also, persistence of growth of firms under LPE (that growth does not persist from one period to the next) is uniquely examined for Asian firms.

Details

Journal of Asia Business Studies, vol. 14 no. 1
Type: Research Article
ISSN: 1558-7894

Keywords

Open Access
Article
Publication date: 5 August 2021

Inder Sekhar Yadav, Debasis Pahi and Rajesh Gangakhedkar

The purpose of this paper is to examine the correlation between firm size, growth and profitability along with other firm-specific variables (like leverage, competition and asset…

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Abstract

Purpose

The purpose of this paper is to examine the correlation between firm size, growth and profitability along with other firm-specific variables (like leverage, competition and asset tangibility), macroeconomic variable (like GDP growth-business cycle) and stock market development variable (like MCR).

Design/methodology/approach

Using the COMPUSTAT Global database this work uses panel dynamic fixed effects model for nearly 12,001 unique non-financial listed and active firms from 1995 to 2016 for 12 industrial and emerging Asia–Pacific economies. This interrelationship was also examined for small, medium and large size companies classified based on three alternate measures such as total assets, net sales and MCR of firms.

Findings

The persistence of profits coefficient was found to be positive and modest. There is evidence of a negative size-profitability and positive growth-profitability relationship suggesting that initially profitability increases with the growth of the firm but eventually, overtime, gains in profit rates reduce, as size increases indicting that large size breeds inefficiency. The relationship between firm's leverage ratio and its asset tangibility is found to be negative with profitability. The business cycle and stock market development variables suggest a positive relationship with the profitability of firms. However, the significance of estimated coefficients was mixed and varied among different selected Asia–Pacific economies.

Practical implications

The study has economic implications on issues such as industrial concentration, risk and optimum size of firms for practicing managers of modern enterprise in emerging markets.

Originality/value

The analysis of the relationship between the firm size, growth and profitability is uniquely determined under a dynamic panel fixed effects framework using firm-specific variables along with macroeconomic and financial development determinants of profitability. This relationship is estimated for a large and new data set of 12 industrial and emerging Asia–Pacific economies.

研究目的

本研究擬探討公司的規模、成長和盈利能力之間的關係, 同時亦涵蓋公司特有的其它變量 (如愩杆作用, 競爭和資產的有形性), 宏觀經濟變量 (如國內生產總值增長與景氣之循環), 以及股市發展變量 (如MCR) 。

研究的設計/方法/理念

本研究以COMPUSTAT 全球資料庫、使用動態面板固定效應模型,涵蓋幾近12001間獨特的、非金融上市及活躍的公司、覆蓋期由1995年至2016年,涉及12個工業及新興的亞太經濟體。這相互關係分析研究亦於大、中及小型企業內進行,而這些企業就規模方面的分類是基於三個交替的測量而釐定的,如總資產、銷售淨額、以及企業的MCR。

研究結果

研究發現、利潤係數的持續性是正且適中不強的。有證據顯示、規模的大小與盈利能力是負相關的,而增長與盈利能力則為正相關;這暗示盈利能力初時會因企業的成長而增強,但隨著時間的推移最终當規模增大、利潤率的增長會下降,這提示我們:大的規模會導致效率低下。企業的杠桿比率與其資產有形性的關聯被發現與盈利能力成負相關。經濟週期及股市發展變量暗示與企業的盈利能力之關聯為正相關。唯估計係數的意義會因被挑選之各個不同亞太經濟體而有異和不統一的。

實際的意義

本研究對在新興市場的現代企業內工作的業務經理有其實際作用,因研究為他們在業務問題如產業集中度、危機、公司的最佳規模等問題上提供了經濟方面的啟示。

研究的原創性/價值

本研究分析公司規模、成長與其盈利能力的關係時,獨特之處是採用了動態面板固定效應模型,並於應用盈利能力的宏觀經濟和金融發展的決定因素的同時,也使用了企業特有的變量。而這關係的分析研究涵蓋12個工業及新興的亞太經濟體的龐大且新的數據集。

Details

European Journal of Management and Business Economics, vol. 31 no. 1
Type: Research Article
ISSN: 2444-8451

Keywords

Article
Publication date: 29 July 2019

Debasis Pahi and Inder Sekhar Yadav

The purpose of this paper is to investigate the nexus between corporate governance and dividend policy of listed Indian firms.

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Abstract

Purpose

The purpose of this paper is to investigate the nexus between corporate governance and dividend policy of listed Indian firms.

Design/methodology/approach

Using new corporate governance stipulations, five new indices were constructed, namely, overall board governance index, board structure index, audit committee index, compensation committee index and nomination committee index. Using the newly developed indices, disclosure index and different firm-specific control variables, different panel Logit and Tobit regression models were estimated for 482 non-financial and non-utility listed firms during 2006–2017. Also, before the econometric analysis, mean difference test was conducted to examine the differences in dividend behaviour and corporate governance practices during pre- and post-Companies Act, 2013 and between payers and non-payers.

Findings

The overall evidence suggests that the firms having stronger corporate governance tend to pay higher dividends suggesting that the firm’s propensity to pay dividends increases with the improvement in corporate governance standards. Among the corporate governance indices board structure, audit committee and disclosure norms show a significant and positive relationship, whereas compensation committee and nomination committee show a positive but insignificant relationship with dividend policy. Control variables mostly had the expected impact on the dividends of the firms.

Practical implications

This study suggests that the establishment of the strong and effective corporate governance system is desirable to mitigate the agency conflicts between managers and shareholders and limit managers’ opportunistic behaviour in dividend payout policy.

Originality/value

This study is one of the latest studies to use several newly constructed indices on corporate governance mechanism based on new stipulations which bring new evidence on their specific impact on the dividend policy for an emerging market economy like India.

Details

Managerial Finance, vol. 45 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 1 November 2023

Debashree Roy Bhattacharjee, Abhisek Kuanr, Neeru Malhotra, Debasis Pradhan and Tapas Ranjan Moharana

Drawing on the self-congruity theory and customer engagement literature, this research accounts for the influence of the three dimensions of customer self-congruity on customer…

Abstract

Purpose

Drawing on the self-congruity theory and customer engagement literature, this research accounts for the influence of the three dimensions of customer self-congruity on customer engagement with global brands by uncovering the mediating mechanism of brand psychological ownership and moderating mechanism of global connectedness. The research framework is tested across developed and developing country contexts to highlight any cultural differences in the drivers of customer engagement with global brands.

Design/methodology/approach

Data were collected from developed (USA; n = 270) and developing (India; n = 273) countries through two online surveys and tested, employing structural equation modeling, across the two markets to investigate cross-cultural variations.

Findings

Social self-congruity has the strongest influence on customer engagement for USA consumers, while all three forms of self-congruity are equally important in India. Psychological ownership consistently works as the mediating mechanism across both contexts. While global connectedness accentuates the relationship between self-congruity and brand psychological ownership for Indian consumers, it attenuates the relationship amongst USA consumers.

Originality/value

While prior literature mainly establishes a direct link between self-congruity and customer engagement, this study provides a deeper understanding of the self-congruity–customer engagement relationship by: a) investigating the mediating role of psychological ownership; b) examining the moderating role of global connectedness and c) studying all three forms of self-congruity (i.e. actual, ideal and social) simultaneously. The study, testing the framework in developing and developed country settings, highlights cultural nuances in forming customer engagement with global brands.

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