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Topic:: Impact On Firm Size On Profitability

This study investigates the impact of firm size on profitability using data from the KSE 100 index in Pakistan from 2011 to 2016. It aims to fill the research gap regarding the firm size-profitability relationship in developing economies and provide insights for businesses, policymakers, and investors. The findings will help optimize firm size for profitability and enhance understanding of industry competition.

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Arooba Zaid
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5 views11 pages

Topic:: Impact On Firm Size On Profitability

This study investigates the impact of firm size on profitability using data from the KSE 100 index in Pakistan from 2011 to 2016. It aims to fill the research gap regarding the firm size-profitability relationship in developing economies and provide insights for businesses, policymakers, and investors. The findings will help optimize firm size for profitability and enhance understanding of industry competition.

Uploaded by

Arooba Zaid
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Topic: Impact on firm size on

profitability
Muhammad Ali

01/25/2025 1
Contents

1 Introduction

2 Research Gap /Problem

3 Research Questions

4 Research Objective

5 Significance

6 Literature Review /Theoretical


frame work

7 References
01/25/2025
2
Introduction to the Study

Firm size plays a critical role in shaping an organization's external


relationships and internal dynamics. Larger firms often dominate
markets due to economies of scale, lower production costs, and
greater resource allocation capabilities. However, firm growth
depends on internal resources and external factors such as political
and judicial stability. In developing countries, disparities in economic
systems further influence firm profitability (Todaro, 2014). This study
analyzes the impact of firm size on profitability, using KSE 100 index
data from 2011–2016, contributing to the literature on this
relationship in a developing economy

01/25/2025 3
Research Objective (s)

This study addresses a critical issue in


finance and management by examining the
firm size-profitability relationship. Findings
will:Help businesses optimize size for
profitability.Inform policymakers on
strategies to support small businesses and
regulate industries.Guide investors in
making informed decisions.Enhance
understanding of industry competition and
resource allocation.
01/25/2025 4
Research Question (s)

1. What is the impact of firm size on profitability?


2. Is there a significant relationship between firm size and
profitability in KSE 100 index-listed firms in Pakistan?

01/25/2025 5
Gap

While prior studies have explored individual profitability


components, limited research exists on the firm size-profitability
relationship in Pakistan’s KSE 100 index context. This study fills
the gap by using the most recent dataset to provide new insights
into this relationship.

01/25/2025 6
Literature Review

1. Prasetyantoko and Parmono (2009):Analyzed 238 Indonesian firms (1994–2004),


finding a positive correlation between firm size (total assets) and profitability (ROA)
during and after the financial crisis, though no link with market value was
established.2. Pervan and Višić (2012):Examined Croatian manufacturing firms
(2002–2010), showing that firm size (log of total assets) positively impacts ROA,
using fixed effects regression.3. Mule et al. (2015):Investigated 53 Kenyan firms
(2010–2014), finding size significantly impacts ROE but not ROA or Tobin's Q, using
random effects GLS estimation.4. Majumdar (1997):Studied 1020 Indian firms
(1988–1994), revealing size positively impacts profitability (ROA) but shows non-
linear effects (negative quadratic and cubic relationships).5. Amato and Amato
(2004):Explored the U.S. retail industry (1977–1987), finding a cubic relationship
between firm size and profitability, emphasizing diminishing returns at higher
sizes.6. Pattitoni et al. (2014):Analyzed 30,764 EU-15 private firms (2004–2011),
identifying a threshold effect: larger firms tend to be more profitable, but excessive
size reduces profitability.7. Doğan (2013):Evaluated 200 Turkish firms (2008–2011)
and found firm size (assets, revenues, employee count) significantly impacts ROA.8.
Niresh and Velnampy (2014):Studied 15 Sri Lankan manufacturing firms (2008–
2012), reporting no significant relationship between size and profitability,
highlighting industry-specific factors

01/25/2025 7
Theoretical Framework

Theoretical Framework:
The performance of a company can be measured in a variety of
ways. We have employed profitability ratios, the most popular
and generally recognised technique for calculating profitability.
The profitability of KSE 100 INDEX listed on the Pakistan Stock
Exchange is ascertained using the profitability ratios. It is
difficult to gauge a company's size because it depends on its
operational capacity and ability to offer a variety of services
and goods to clients at the same time.

01/25/2025 8
Firm size Profitability

Return on
Log of total sale
assets

Log of Total Assets Net Profit

01/25/2025 9
References

Best, R. (2012). Market-Based Management.Bhayani,


S. J. (2010). Economic progression and firm size.Grover, S. (2013).
Economies of scale in large firms.Peng, M. (2016).
Global Strategic Management.Seitz, N., & Ellison, M. (1998).
Financing mechanisms and firm risks.Todaro, M. P. (2014). Economic systems and firm disparities.

01/25/2025 10
Any Questions?

01/25/2025 11

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