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The relationship between growth and profit: evidence from firm-level panel data

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  • Lee, Sanghoon

Abstract

This paper examines the firm-level panel data of Korea to identify the relationship between growth and profit. Both static and dynamic panel data regressions are used by applying fixed effects and generalized method of moments (GMM) methods. In addition, non-linear regressions, LAD regressions, and split-sample regressions are employed. The empirical analysis finds that profit affects growth negatively, but growth affects profit positively. The negative effect of profit on growth has not been reported previously. We interpret the result to imply that institutional environment has effects on the relationship between firm growth and profit. Another noteworthy finding is that the effect of growth on profit is found to be positive only in the case of old firms, not in the case of young firms.

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  • Lee, Sanghoon, 2014. "The relationship between growth and profit: evidence from firm-level panel data," Structural Change and Economic Dynamics, Elsevier, vol. 28(C), pages 1-11.
    • Handle: RePEc:eee:streco:v:28:y:2014:i:c:p:1-11
    DOI: 10.1016/j.strueco.2013.08.002
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    More about this item

    Keywords

    Profit; Growth; Firm age; Korea; Panel data;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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