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No Appealing Future For High Growth – Low Profitability Firms: Evidence from Turkey’s Top 1000

Author

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  • Nuri YILDIRIM

    (Yaşar Üniversitesi)

Abstract

The view that profitability, not growth, is the main driving force behind the firm performance, and unprofitable high growth can not lead to financial success has often been discussed in the literature. In this study, I tested this hypothesis on Turkey’s top 1000 data using an extended version of the method of Davidson et al. (2009). My sample strongly supports the hypothesis that controlling for leverage, low growth-high profitability firms (profit-focused firms) outperform high growth-low profitability firms (growth-focused firms) regarding both directions of their transition to an upper (i.e., high growth-high profitability) state and a lower (i.e., low growth-low profitability) state in subsequent periods. The hypothesis that controlling for firm type (growth-focused or profit-focused), leverage matters with respect to firm’s future performance is weakly supported by 3-year transition data.

Suggested Citation

  • Nuri YILDIRIM, 2011. "No Appealing Future For High Growth – Low Profitability Firms: Evidence from Turkey’s Top 1000," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 26(307), pages 31-45.
    • Handle: RePEc:iif:iifjrn:v:26:y:2011:i:307:p:31-45
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    More about this item

    Keywords

    Firm performance; growth; profitability; Turkey;
    All these keywords.

    JEL classification:

    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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