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Profitability and Firm Size–Growth Relationship in Construction Companies in Malaysia From 2003 to 2010

Author

Listed:
  • Devinaga Rasiah

    (Faculty of Business, Multimedia University (Malacca Campus), Malaysia)

  • David Yoon Kin Tong

    (Faculty of Business, Multimedia University (Malacca Campus), Malaysia)

  • Peong Kwee Kim

    (Faculty of Business, Multimedia University (Malacca Campus), Malaysia)

Abstract

In this study, we intended to examine empirically how a firm's profitability performance would impact its growth process and the inference for Gibrat's Law. The basic study looks at small, medium and large firms' tendency to grow when their internally generated profits are high. The sample is 124 construction companies listed from years 2003 to 2010 at BURSA Malaysia. Data used is secondary data collected from BURSA Malaysia and annual reports. The result indicated that "growth" contributed significantly to profitability in both small and medium-sized construction companies, but was not significant in large companies. Thus, hypothesis two was supported. This study supports Gibrat's Law, showing that size and growth rate are independent.

Suggested Citation

  • Devinaga Rasiah & David Yoon Kin Tong & Peong Kwee Kim, 2014. "Profitability and Firm Size–Growth Relationship in Construction Companies in Malaysia From 2003 to 2010," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 17(03), pages 1-19.
    • Handle: RePEc:wsi:rpbfmp:v:17:y:2014:i:03:n:s0219091514500143
    DOI: 10.1142/S0219091514500143
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    References listed on IDEAS

    as
    1. Alex Coad, 2007. "Firm Growth: a Survey," Post-Print halshs-00155762, HAL.
    2. Evans, David & Leighton, Linda, 1987. "The Effects of Demographic and Industry Changes on U.S. Self-Employment," Working Papers 87-34, C.V. Starr Center for Applied Economics, New York University.
    3. David S. Evans & Linda S. Leighton, 1989. "Why Do Smaller Firms Pay Less?," Journal of Human Resources, University of Wisconsin Press, vol. 24(2), pages 299-318.
    4. Audretsch, David & Dohse, Dirk, 2004. "The Impact of Location on Firm Growth," CEPR Discussion Papers 4332, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Khairul Alom, 2018. "Liquidity and Profitability: A Co-Integration Study," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 21(02), pages 1-20, June.

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    More about this item

    Keywords

    Size; profitability; construction companies and growth;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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