Sensitivity of firm size measures to practices of corporate finance: evidence from BRICS

Syed Danial Hashmi (), Saqib Gulzar (), Zeshan Ghafoor () and Iram Naz ()
Additional contact information
Syed Danial Hashmi: Riphah International University
Saqib Gulzar: COMSATS University, Wah Campus
Zeshan Ghafoor: Riphah International University
Iram Naz: Riphah International University

Future Business Journal, 2020, vol. 6, issue 1, 1-19

Abstract: Abstract Firm size has remained a major area of investigation for researchers from a long time. This study aims at examining impact of different measures of firm size (total assets, total sales, market capitalization and number of employees) on seven important practices of corporate finance which are financial policy, dividend policy, investment policy, diversification, firm performance, compensation and incentives and board structure (corporate governance). Moreover, this study also examines the sensitivity of different proxies of firm size on these practices of corporate finance. Data from BRICS (Brazil, Russia, India, China and South Africa) have been analysed. Overall results supported the hypotheses. Study concludes that different proxies of firm size are differently related to practices of corporate finance based on sign, significance and R2. All proxies capture different aspects of firm size and have different implications for corporate finance. Thus, this study confirms “measurement effect” in “size effect”. Unfortunately, this means that many of past studies may not be robust and are biased. Researchers thus need to be careful when selecting any proxy of firm size for their research keeping in mind the scope and context of their work. Choosing a proxy thus is a theoretical and empirical question.

Keywords: Firm size; Size effect; Practices of corporate finance; Sensitivity; BRICS (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (9)

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DOI: 10.1186/s43093-020-00015-y

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