Determinants of Firm Growth: Empirical Evidence from Pakistan

50250 Ahmed Imran Hunjra et al./ Elixir Inter. Busi. Mgmt. 116 (2018) 50250-50256 Available online at www.elixirpublishers.com (Elixir International Journal) International Business Management Elixir Inter. Busi. Mgmt. 116 (2018) 50250-50256 Determinants of Firm Growth: Empirical Evidence from Pakistan Ahmed Imran Hunjra1, Azhar Iftikhar2, Asad Mehmood3 and Kaleem Ullah4 1 Post-Doctoral Fellow, School of Accounting, Finance and Economics, The University of Waikato, Hamilton, New Zealand and Assistant Professor, UIMS-PMAS- University of Arid Agriculture Rawalpindi, Pakistan. 2 MS Scholar, UIMS-PMAS-University of Arid Agriculture Rawalpindi, Pakistan. 3 Visiting Lecturer, UIMS-PMAS-University of Arid Agriculture Rawalpindi, Pakistan. 4 PhD Scholar, Islamia College Peshawar and Lecturer, UIMS-PMAS-University of Arid Agriculture Rawalpindi, Pakistan. ARTICLE INFO Arti cl e h i sto ry : Received: 30 July 2016; Received in revised form: 13 March 2018; Accepted: 24 March 2018; K ey w o rd s Firm Growth, Leverage, Age, Size, Profitability, Liquidity, Innovation. AB S T RA C T The purpose of this study is to investigate the impact of financial determinants on firm growth. The impact of financial determinants: profitability, leverage, innovation and leverage on firm growth are studied. Firm size and firm age are also included to investigate how such variables effect firm growth. Data was collected for a sample of 373 non-financial companies listed at Karachi Stock Exchange for a period of six years from 2006 to 2011. Fixed effect model for panel data was applied for analysis and results. The results of this research show that financial determinants of profitability, leverage and innovation have a positive and significant impact on firm growth in Pakistani context. Firm size also have a significant positive effect. However, there is negative relationship of firm age on firm growth. Liquidity has a positive relationship with growth, yet its impact was non-significant. More comprehensive, detailed and extended analysis in future studies will definitely be helpful in gaining a profound understanding of different aspects of the growth of the firms, and hence in formulating better policies for economic development at micro and macro level. © 2018 Elixir all rights reserved. Introduction Growth of firms is vital in overall economic well being. So ample resources need to be planned and allocated by governments, economists and international organizations for the growth and development of businesses. To ensure that usefulness of such efforts, effective programs for improvement of firm growth need to be implemented. Hence, the process and the variables that lead to firm growth need to be clearly understood. According to Wiklund (1998) [1], the term „Growth‟ signifies the changes that happen in the magnitude and size from one period to another. In the words, growth has two distinct meanings. Firstly, it means the changes relevant to the amount while a firm progresses in size from small to large. Secondly, growth is a comprehensive process of organizational change that includes a range of changes other than size of the firm [2]. Davidsson, Delmar & Wiklund (2006) [3] viewed that firm growth is a multidimensional and complex concept that can be hard to predict. It is its diversity of scope that makes it a demanding subject for research. Firm growth can be measured in a variety of ways with diversity in the unit of such growth measurement. Thus, the researchers, managers and policymakers must be aware of this versatility of the phenomenon of firm growth. The growth of firms is vital in overall economic well-being, ample resources are needed to be planned and allocated by governments, economists and international organizations for the growth and development of businesses. Various theories of firm growth have been presented by researchers in the course of history. One of the earliest theories presented in this respect is the Law of Proportional Effect given by Gibrat (1931) [4] that takes the firm growth as Tele: +923348505133 E-mail address: [email protected] © 2018 Elixir All rights reserved a random process and no clear relation can be established between firm growth and its size variation, i.e., size at the start and at the end. The low presented by Gibrat [4] has been tested by many researchers with varying results. Some of the studies completely support Gibrat‟s Law, like Hart (1962) [5], Hart and Prais (1956) [6] and some results demonstrate partial confirmation of the Gibrat‟s Law [4]. Hymer and Pashigan (1962) [7] conclude irrelevance between firm growth and firm size. The studies undertaken by Kumar (1985) [8] and Evans (1987) [9] points out that there is a negative correlation between firm growth and firm size while the work of Hart (2000) [10] and Glancey (1998) [11] shows that rate of growth for younger firms is comparatively faster than large and mature firms. The next milestone in respect of research on firm‟s growth is the work of Penrose (1959) [12] who presented the resource based view of firm growth. Penrose deviated from the traditional „firm size‟ perspective and emphasized considering the firm as a collection of resources and how such resources are utilized for growth. Penrose analyzed the process of how quickly firms accumulate such resources and what opportunities of firm growth could be possible in case of under-utilization of firm‟s resources. Further studies conducted by behavioral economists like [13] [14] [15] show that the differences in form size leading to firm growth are due to the difference between ownership structure and objectives of control. When the ownership and control of the firm are separate, then the managers who are the controllers of the firm try to maximize their own interests rather than the value of the firm. Thus behavioral views of firm growth analyze firm performance and growth based on diversity in firm behaviors. 50251 Ahmed Imran Hunjra et al./ Elixir Inter. Busi. Mgmt. 116 (2018) 50250-50256 Recent developments in research on firm growth have transport. The findings indicated that small firms had a higher resulted in the development of models of learning and average growth than large firms. selection. According to Geroski (1995) [16], survival and The ultimate goal of any economic activity is to earn growth of the firm depends upon how it learns and adapts profit. We can measure this profit by a number of ways, most itself to the changing environment. Jovanovic (1982) [17] common of which being Return on Equity (ROE) that we can presented a model of evolution of industry based on random calculate by dividing net income by shareholders‟ equity. The distribution of firm‟s cost curves to firm related shocks. He measures of Return on Equity and profitability are a popular points out that with the passage of time, firms learns how such indicator of the growth potential of an enterprise. A firm with shocks affect their performance. Those firms that pass through a high Return on Equity holds the scope for investment and favorable shocks have greater potential of growth and such increased investment definitely results in enhanced survival, while others may not adjust to firm specific shocks growth. Penrose (1959) [12] added managerial impact concept and their performance may decline that may lead to even to the traditional relationship that was believed to exist closing of business. It is further concluded that small firms between profitability and growth. The devotion to grow is have greater but more volatile growth rates and compared to determined by the interest and the capacity of maximization of those with larger size. Stage theories of firm growth have also profitability. Glancey (1998) [11] formulated his study based been presented explaining changes in the optimum size of the on the arguments supported by Penrose and found a positive firm over time. Greiner (1972) [18] presented five phase view relationship between profitability and growth. Coad and Holzl of firm evolution. These five phases are: creativity, direction, (2010) [27] found that profitability and growth did not show a delegation, co-ordination and collaboration. Study conducted clear relationship and empirical research could not show by Mueller (1972) [19] shows that a profit maximizing firm consensus between these two aspects. Goddard, Molyneux and may experience only a finite push of growth by bringing in Wilson (2004) [28] argued that profitability and growth did each new innovation. Although stage theories of firm growth not have a clear linkage between each other. They concluded are useful in understanding of growth concept, yet these that there was an ambiguous relationship between profitability theories fail to explain why firms show variable results while and growth. Jang and Park (2011) [29] showed a positive passing through same phase of growth. relationship between previous rates of profit on the current As the concept of firm growth is a complex and versatile rate of growth. Serap ÇOBAN (2014) [30] found a statistically phenomenon, various growth models and theories have been significant positive relation between current profits and presented over time. Still no single theory can current growth. He also found that the impact of current comprehensively explain the evolution of firm and the growth profits on current growth was much stronger than the impact phenomenon. Hence, according to Coad (2009) [20], the of current growth on current profits in the case of Turkish empirical approach seems appropriate to analyze the firm manufacturing firms. These results appeared to contradict the growth based on facts and figures. This study focuses the theories in Industrial Organization which suggested a negative empirical evidence of the determinants of firm growth based relationship. on the analysis of Pakistani firms. According to Pecking Order theory, firms use the principle of least effort in prioritizing their sources of Review of Literature Various theories of firm growth have been presented by financing. We can say that packing order theory has the researchers in the course of history. One of the earliest sequence of use of internally generated capital, followed by theories presented in this respect is the Law of Proportional external debt, and issuance of equity as a final resort. Packing Effect given by Gibrat (1931) [4] that takes the firm growth as order theory was suggested by Donaldson (1961) [31] and a random process and no clear relation can be established then it was improved by Myers and Majluf (1984) [32]. The between firm growth and its size variation. The focus of most relevance of packing order phenomenon to our study is that of empirical studies on firm growth is on the size and age the most inexpensive way of raising additional capital is the effects. Hall (1987) [21] presented evidence on firm internal sources of financing of a firm. Huyghebaert and Van employment growth from publicly traded firms in the US de Gucht (2007) [33] highlighted that young companies often manufacturing sector. The results showed that small firms tend faced comparatively limited access to external financing and if to grow faster than the large ones. Wagner (1992) [22] tested successful in attracting external debt, such companies had to Gibrat's law with a data set of manufacturing establishments pay higher price. Thus, young companies faced greater risk of from Germany for 1978-1989. Wagner did not find any size failure. Therefore, the growth possibility for young companies effect of growth, and hence Gibrat's law seemed to hold. is generally limited as compared to mature companies. Harhoff et al. (1998) [23] did, however, find evidence that Another angle of explanation of the financing sequence small firms grow faster than large ones. Almus and Nerlinger expressed by packing order theory is that the managers want (2000) [24] studied new firms established in German to keep full control of the company to themselves. Therefore, manufacturing sector. Small firms were found to grow faster they demonstrate hesitation in raising funds from sources than large ones. Dunne and Hughes (1994) [25] looked at both outside the company. Additionally, acquisition of funds the quoted and unquoted UK companies in the period 1975through debt financing is comparatively harder for new firms 1985. The study suggested that size matters for growth for as banks and other financial institutions do not possess the small firms. Hart and Oulton (1996) [26] provided further financial track record and comprehensive credit score about evidence on firm growth from the UK. In their results, small such start-up firms. Positive effect of leverage on growth of firms outperformed bigger firms and hence Gibrat's law was the firm has been found in various studies like Heshmati violated. Kumar (1985) [8] investigated the size effect and (2001) [34], Honjo and Harada (2006) [35]. According to persistence of growth on UK data. A notable difference with Rahaman (2011) [36], as the firms get more grip on earlier studies was that this data set also contained a limited overcoming the constraints in external financing, they range of service industries such as wholesale, retail, and emphasize more on external financing sources as compared to internal financing option. He found a positive and a significant 50252 Ahmed Imran Hunjra et al./ Elixir Inter. Busi. Mgmt. 116 (2018) 50250-50256 relation between leverage and firm growth. Huyn and Petrunia Mathur (2011) [51] showed that the firms which were able to (2010) [37] also studied the effect of leverage and initial maintain higher levels of liquidity had to face less severe financial size as firm growth determinants and found a financing limitations. Surplus cash available would shrink positive non-linear relationship between leverage and firm financing constraints, thus enabling the company to finance growth. the growth opportunities at comparatively lesser cost. Firms Among the determinants of firm growth, innovation has having the capability to invest at a reduced cost were more been one of the most important drivers. By adapting better inclined for investment and thus aiming for higher growth. operating methods and investment in innovative products, This study proposes a conceptual framework of the companies can achieve a competitive edge. While reviewing relationship between firm growth and its financial empirical literature, it is found that different methods for the determinants: Profitability, Leverage, Innovation, Liquidity, measurement of innovation have been presented by and also firm size and firm age. On the basis of this theoretical researchers. Coad and Rao (2006) [38] measured innovation framework “Fig. 1”, research model has been developed and based on the number of patients and the volume of R&D data collection carried out accordingly expenditure. Cainelli, Evangelista & Savona (2006) [39] studied the Italian companies working in services sector for the impact of innovation on economic performance. They investigated, among other questions, the impact of innovation on the performance of companies with reference to growth and productivity. Their findings express a positive impact of innovation on productivity as well as growth. Thus it is concluded that innovating companies showed better results related to growth as compared to non-innovating companies. Haned & Colombelli (2011) [40] also investigated the correlation between innovation and firm growth by using data of French firms and found that firms with more innovative products indicate more growth as compared to firms that do not have significant developments in product innovation. Other researchers that came up with similar findings are Roper Figure 1. Theoretical framework (1997) [41], Geroski and Machin (1992) [42] and Corsino Based on the empirical literature about determinants of (2008) [43]. Bottazzi et al. (2001) [44] conducted the study on firm growth, this study investigated the following hypotheses: large pharmaceutical firms based on the data comprising a H1: Profitability has a positive impact on firm growth. period of eleven years and no significant relationship was H2: Leverage has a positive impact on firm growth. found between innovation and firm growth. Geroski & H3: Innovation has a positive impact on firm growth. Mazzucato (2002) [45] also expressed irrelevance between H4: Liquidity has a positive impact on firm growth. innovation and growth as an outcome of their study of car H5: Firm size has a negative impact on firm growth. manufacturing companies of United States by analyzing data H6: Firm age has a negative impact on firm growth. from 1910 to 1998. Aldemir (2011) [46] examined the Materials and Methods relationship between intangible assets and firm growth based Panel data was used by Gill and Mathur (2011) [51] for on a sample of Spanish renewable energy producers. A the period 2008-2010 to estimate the factors affecting positive and significant impact of intangible assets was found potential growth of Canadian service and manufacturing firms, on firm growth for small companies, while no significant by applying non-experimental and co-relational research relationship could be established for large companies. Geroski design. Mateev and Anastasov (2010) [49] also undertook (1999) [47] came up with the findings that growth rates of OLS regression with a panel data methodology for the large and/or old firms are mostly unpredictable and irregular. empirical research on determinants that are concerned with Alex Coad, Agustí Segarra and Mercedes Teruel (2016) [48] fast growing SMEs in the regions of Central and Eastern found that young firms face larger performance benefits from Europe. They argued that the examination based on panel data R&D at the upper quantiles of the growth rate distribution, but was suitable for controlling heterogeneity and also reducing face larger decline at the lower quantiles. R&D investment by collinearity that may be present among variables, and this young firms therefore appeared to be significantly riskier than technique was helpful in eliminating the potential biases R&D investment by more mature firms. present in the resulting estimation stemming from correlation Firm growth undertakes the idea that companies grow at a between masked individual effects and explanatory variables faster pace if they demonstrate a persistent level of current under study in the model. Based on the same methodology assets to pay off their short term liabilities. Mateev & mentioned above, this study applied analytical models on the Anastasov (2010) [49] used current ratio as a measure of the panel data of firms in non financial sectors that are listed at level of short-term liquidity. They argued that an increase in KSE (Karachi Stock Exchange) to find the impact of various the current ratio (calculated by dividing the current assets by financial determinants on firm growth, and also to know the the current liabilities) lead to strengthening of liquidity linkages of firm age and its size on firm growth in Pakistani position of firm. The companies with lesser level of liquidity context. For this study, our main emphasis was on financial faced more cash restraints and thus, had to face greater ratios and how such ratios had an influence on growth of difficulties in making payments to suppliers. Thus, a healthy companies in Pakistani context. For finding these ratios, data cash cycle needed good relationship with suppliers and was collected from financial statements in annual reports of adequate working capital [50]. A company that was not in a the companies listed at KSE (Karachi Stock Exchange) and position to hold a certain level of liquidity may have to from State Bank of Pakistan (SBP) publication „Financial struggle to keep its existence at a prominent level. Gill & Statements Analysis of Companies (Non-Financial) Listed at 50253 Ahmed Imran Hunjra et al./ Elixir Inter. Busi. Mgmt. 116 (2018) 50250-50256 Karachi Stock Exchange (2006-2011)‟. Data about firm age companies. As the data was collected for six years (2006was gathered from Securities and Exchange Commission of 2011) for each company, we have a total of 2238 observations. Pakistan (SECP). Insurance companies, banks and financial As the data for dependent variable „Growth‟ was related to institutions are not included in our sample as such institutions sales growth based on previous year‟s change, the first year are subject to some specific legal requirements. 2006 in our analysis had to be kept blank, thus resulting in a Firm Growth is the dependent variable in this study. Due total of 1867 values for the variable Growth. to multidimensional nature of firm growth, many different Table 2. Descriptive statistics indicators can be used for its measurement. Previous studies Variables Mean Std. Deviation N demonstrate that various parameters for firm growth have Growth 0.35535 6.919558 1867 been used [52] [3]. Going through the literature, it is observed Profitability 0.06873 3.735759 2238 that researchers have used different indicators for study of Leverage 1.66973 52.465060 2238 growth. For instance, five different indicators used for the Innovation 0.00836 0.045525 2238 study of growth were identified by Delmar (2006) [53]. These indicators included sales (turnover or revenue), performance, Liquidity 2.29906 23.168121 2238 employed workforce, assets growth and firm‟s share in the Size 14.23598 2.577594 2238 market. It can be concluded from the work of Delmar et al. Age 30.56300 14.996746 2238 (2003) [54] that sales growth could be taken as the most The missing values were dealt pair-wise. Results show popular choice of researchers as sales was used in 31% among that average growth of the companies included in our sample all the studies focused on growth phenomenon [53]. Hence, is 35.5%. Profitability (ROE) showed an average of 6.8%. this study also undertakes „Sales Growth‟ as the measure of Leverage is 1.67 indicating that an average company in our the dependent variable „Firm Growth‟. Independent variables sample has 1.6 times owner‟s equity as compared to liabilities. used in this study are: Profitability, Leverage, Innovation, We come to a very little average value 0.08% for innovation Liquidity, Firm size, Firm age. (intangible assets ratio to total assets). Liquidity (Current Table 1. Variables Definition Ratio) has a value of 2.299 which means that companies in Variables Definition sample, on average, have almost 2 times more current assets to Dependent pay off their current liabilities. Average size of companies Variable: under study is 14.2 and average age is 30 years. Growth Sales growth (t1) = Sales (t1) - Sales (t0) Table 3. Hausman Test Sales (t0) Independent Variables: Profitability ROE = Leverage Liabilities to Equity = Innovation Intangible assets ratio = Liquidity Current Ratio = Size Age ln (Total assets) Age since incorporation of business Test Summary Chi-Sq. Statistic Chi-Sq. d.f. Prob. Cross-section random 20.351856 Net Profit Shareholders‟ Equity Total Liabilities Shareholders‟ Equity Intangible Assets Total Assets Current Assets Current Liabilities The regression equation is defined as follows: Growth = β0 + β1 Profitability + β2 Leverage + β3 Innovation + β4 Liquidity - β5 Size - β6 Age (1) This study mainly focused about investigation of financial determinants, firm size and age, and how these could have an impact on the growth of firms in Pakistani context. To find this relationship, we applied a fixed effect regression model on panel data for the period 2006-2011 of 373 companies selected from non financial sectors listed at KSE (Karachi Stock Exchange). Schimke and Brenner (2011) [55] also had applied a similar technique. 26 companies were excluded from our sample due to unavailability of required data. In this study, it is assumed that firm growth demonstrates the pattern of Normal Distribution. Diagram given below shows the histogram of Growth variable included in our analysis. It is clear from the histogram the data under study is approximately normally distributed. Results and Discussions The sample of this study consists of 373 listed companies in various non-financial sectors and each company‟s observations consist of six year (2006-2011). So we applied fixed effect model for the analysis of panel data. Table 2 shows the descriptive statistics results of our model under study. Total sample consisted of 373 listed 6 0.0024 Above result of table 3 represents that the fixed effect is preferable for estimating panel data under study because the null hypothesis of Hausman test that there is no difference between fixed effect and random effect models is rejected against the alternative hypothesis that fixed effect model is preferable because p-value is less than 5% level of significance. Table 4. Results of Fixed effect model Variable Coefficient Std. Error Innovation 1.234816 0.495429 0.005210 0.001179 Leverage 0.000483 0.000585 Liquidity Profitability 0.101294 0.018220 0.006801 0.001625 Size -0.008333 0.004566 Age C (Constant) Overall Prob. 0.485627 tStatistic 2.492419 4.418738 0.826374 5.559507 4.185327 1.825179 0.151742 3.200347 Prob. FRstatistics squared 0.0128 2.1527 0.3535 0.0000 0.4087 0.0000 0.0000 0.0682 0.0014 0.0000 By looking at table 4 above, we can see that Profitability has a positive and significant impact on Growth (0.101). It means that keeping other variables unchanged, Firm growth will increase by 10% with one unit increase in profitability (ROE). Leverage also has a significant positive relation with Form Growth though this relationship is not very prominent (0.005 or just 0.5%). However, results show that as leverage increases, growth also shows an increase. Innovation shows a significant and positive relationship (+123%) with Firm Growth. It indicates that investment in intangible assets has a remarkable effect of more than 100%, on average, on the growth of firms. 50254 Ahmed Imran Hunjra et al./ Elixir Inter. Busi. Mgmt. 116 (2018) 50250-50256 According to our analysis, Liquidity (current ratio) has an which is in conformity with most of the earlier empirical almost unnoticeable positive effect (0.04%) on Firm Growth findings. on average. However, this effect is non-significant regarding Conclusion our sample of non-financial listed companies of Pakistan. Firm This study analyzed the determinants of firm growth in Size shows a significant, minute positive relationship with the Pakistani context. The research was mainly focused on Firm Growth. It means that size of the companies in Pakistani financial ratios which measure profitability, leverage, context does not have a major impact on growth of the innovation and liquidity and how these ratios affect the firm companies, though large companies seem to affect growth a growth. We also analyzed the impact of firm size and firm age little more than small and new firms. Firm Age also has quite on growth. Data was collected from annual reports of a little but negative impact (-0.008) on firm growth. Hence, we companies in non-financial sector listed at Karachi Stock can say that increase in age of firm shows a little decrease in Exchange, from SBP publication „Financial Statements its growth, i.e., firms becoming old show a decline in their Analysis of Companies (Non-Financial) Listed at Karachi struggle for growth, which means that new and young firms Stock Exchange (2006-2011)‟ and data was also gathered have better growth potential. from Securities and Exchange Commission of Pakistan The value of R-squared is 0.35 and Durbin-Watson value (SECP). For analysis of panel data, fixed effect model was is 2.30 (well between 1.25 and 2.50). It means that our fixed used. Results of our study show that major financial effect model of panel data fulfills the overall model fit. Above determinants do have a positive impact on the growth of the results about the coefficients of estimators show that the firms. Especially, profitability and Innovation have a findings of this research mostly indicate an agreement with remarkable positive effect on growth. A firm with a healthier hypotheses formulated based on empirical literature. H1, H2 Return on Equity (ROE) is expected to grow at a and H3 are proved to be correct, i.e., Profitability, Leverage comparatively faster pace. Similarly, innovation (intangible and Innovation have positive relationship with Firm Growth. assets ratio) shows a remarkable positive relationship with Hypothesis H4 does not show a reliable confirmation as the growth. It means that investment in R&D, innovation, creative effect of Liquidity on Firm Growth is though positive, yet is and sophisticated processes and technological developments non-significant. H5 about negative relation between Growth brings a revolutionary break-through in the advancement of and Firm size is rejected as the results of our analysis are firms. showing a significant positive relationship between Growth Like other studies, this research also suffers from certain and Firm size in Pakistan context. Firm age shows a negative limitations. First, sample data was collected from 2006 to impact on Firm Growth. Although it proves H6 in our study 2011 only for six years. With data comprising greater periods about negative correlation between Growth and Firm age, yet and a larger sample, the study would have shown even better the results are non-significant, though quite near to level of results. Second, the findings of this research are not based on a significance. broad population, since only listed companies in non-financial The results of the present study are in line with the sector were taken into account. The findings thus only apply to previous studies like Haned & Colombelli (2011) [40] non-financial sector and would have shown better results if investigated the correlation between innovation and firm listed companies in financial sector were also used, or if both growth and found that firms with more innovative products public and private limited companies were taken into indicate more growth. Other researchers that came up with consideration. Third, the analysis was carried out on the whole similar findings are Roper (1997) [41], Geroski and Machin sample. If separate analysis was done for small and large (1992) [42] and Corsino (2008) [43]. In the response of companies, for new and old firms and for different sectors of leverage, Rahaman (2011) [36] found a positive and a operation, we would have attained more detailed results and a significant relation between leverage and firm growth. Huyn comprehensive understanding of the phenomenon of firm and Petrunia (2010) [37] also found a significant positive growth. Fourth, measures of firm growth other than sales relationship between leverage and firm growth. The results of growth could also be used based on the existing literature on this work are validated by the above said studies. For the study firm growth. Fifth, a comprehensive analysis could be about liquidity, Gill & Mathur (2011) [51] showed that the undertaken by adding more dependent variables in the study. firms which were able to maintain higher levels of liquidity The study of firm growth can prove a great advancement in faced comparatively less stringent financial conditions, which understanding the phenomenon of the growth potential of as helpful in financing the growth alternatives at enterprises. Study of firm growth from the perspective of its comparatively lesser expenses. Regarding profitability, we see various determinants will enhance our understanding of that Glancey (1998) [11] pointed out a positive correlation diversified effects that lead to a successful firm and hence, it between profitability and growth. Our study also showed a will be remarkably helpful in formulating the development significant and positive linkage between profitability and strategies for emerging economies. More determinants should growth and thus, the results are consistent with preceding be included in the analysis to broaden the vision about this studies. Hall (1987) [21] showed that small firms tend to grow growth concept. Use of sophisticated econometric techniques faster than the large ones. Harhoff et al. (1998) [23] also found is hereby strongly recommended for a profound and evidence that small firms grow faster than large ones. 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