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Firms' growth opportunities and profitability: a nonlinear relationship

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  • Zelia Serrasqueiro
  • Paulo Macas Nunes
  • Sequeira Tiago Neves Sequeira

Abstract

Using different panel estimators, this article shows that the relationship between growth opportunities and profitability is nonlinear in a sample of firms in the Portuguese Stock Market. These results highlight that firms with low and high growth opportunities tend to show high profitability and firms in the middle of the growth opportunities distribution have small profitability. These suggest that the agency problems between managers and owners are particularly relevant in firms with middle growth opportunities, as managers seem to act in order to simultaneously grow and decrease profitability.

Suggested Citation

  • Zelia Serrasqueiro & Paulo Macas Nunes & Sequeira Tiago Neves Sequeira, 2007. "Firms' growth opportunities and profitability: a nonlinear relationship," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 3(6), pages 373-379.
  • Handle: RePEc:taf:apfelt:v:3:y:2007:i:6:p:373-379
    DOI: 10.1080/17446540701262827
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    References listed on IDEAS

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