SUSTAINABLE GROWTH OF NONFINANCIAL FIRMS: MICROECONOMETRIC EVIDENCE FROM PAKISTAN

Muhammad Mubeen, Muhammad Nadim Hanif

Abstract


This research has investigated the sustainability of growth of nonfinancial
firms in case of Pakistan. For this purpose, explanatory
variable of earnings per share and total assets turnover were used as
controlling factors and liquidity, size and cash flows were used as
independent variables. Balanced panel of 27 firms with 24 annual
time dimensions has been used from 1988 to 2011. Model specification
criteria were in favour of pooled least squares but due to heterogeneity
of firms, fixed effect model was opted for. The results of research were
robust against internal growth but not robust to sustainable growth
indicating that, in case of Pakistan, the leverage impact, which is the
key difference between internal growth and sustainable growth might
be playing some unexplained role for the growth of nonfinancial firms.
For steady, regular and internal growth, liquidity and cash generation
ability are playing a significant role but fail to support growth in the
long run and in a sustainable way.


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