Dynamics of Growth and Profitability: The Case of Japanese Manufacturing Firms

Akihiko Nakano and Donghun Kim

Global Economic Review, 2011, vol. 40, issue 1, pages 67-81

Abstract: This study investigates interaction between firm growth and profitability using panel data on 1633 Japanese manufacturing firms for 1987-2007. Our estimation results generally confirm that firms face a trade-off between growth and profitability and show that, in Japanese manufacturing firms, the link between prior growth and current profits is much stronger than the link between prior profits and current growth. Therefore, the study confirms that current profits are a pre-requisite for future growth while excessive current growth is detrimental to future profits. It is found, however, that in some sectors, such as the automobile industry and the chemical industry, high growth and high profit rates can be achieved at the same time without damaging profitability.

Keywords: Firm growth; profitability; law of proportionate effects; persistence of profits (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/1226508X.2011.559329 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:taf:glecrv:v:40:y:2011:i:1:p:67-81

Ordering information: This journal article can be ordered from
http://www.tandf.co.uk/journals/subscription.asp

Access Statistics for this article

Global Economic Review is edited by Kap-Young Jeong

More articles in Global Economic Review from Taylor and Francis Journals
Series data maintained by Michael McNulty ().