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Firm age and liquidity ratio as predictors of firm growth: evidence from Indian firms

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  • Amith Vikram Megaravalli
  • Gabriele Sampagnaro

Abstract

The result of the study shows that liquidity ratio and firm age increases the probability of firm becoming high growth or low growth. However, the result indicates that the chances of being high-growth firm are higher for young firms. Quantile results show that the coefficient of liquidity ratio switches from negative in lower quantiles to become positive in upper quantile with the strong positive effect and firm age coefficients are largest in the lower quantiles. These results also confirm the probit result as per which firm age is negatively significant with the growth of the firm. The present study considers an innovative approach that considers balance sheet issued the year prior to the observation of rapid growth as predictors of firm growth (similar to the credit scoring models, i.e. the Z-score model, to measure the probability of default).

Suggested Citation

  • Amith Vikram Megaravalli & Gabriele Sampagnaro, 2018. "Firm age and liquidity ratio as predictors of firm growth: evidence from Indian firms," Applied Economics Letters, Taylor & Francis Journals, vol. 25(19), pages 1373-1375, November.
    • Handle: RePEc:taf:apeclt:v:25:y:2018:i:19:p:1373-1375
    DOI: 10.1080/13504851.2017.1420883
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    Cited by:

    1. Nurul Izzaty Hasanah Azhar & Norziana Lokman & Md. Mahmudul Alam & Jamaliah Said, 2021. "Factors determining Z-score and corporate failure in Malaysian companies," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 21(3), pages 370-386.
    2. Raysa Geaquinto Rocha & João J. Ferreira, 2022. "Gazelles (High-Growth) Companies: a Bibliometric Science Map of the Field," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(4), pages 2911-2934, December.

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