The Effect of Firm's Age, Size and Growth on Its Profitability: Evidence from Jordan

Maram Al Nawaiseh

doi:10.7176/ejbm/12-5-10

Abstract

This study aims at testing the effect firm's age, size and growth on its profitability based on the financial data of (22) Jordanian insurance firms that are registered in the Amman Security Exchange (ASE) during the period (2008-2017). They represent 95.2 % of insurance firms. The study relied on secondary data of insurance firms that have been published on their website and on ASE website In the study, the mean, standard deviations were used to describe the characteristics of the variables. Simple regression analysis was used to test the study's hypotheses. Simple. the skewness test of all variable is used to know if they have a normal distribution.The study shows that there is an insignificant effect of the insurance firm's age, size, and growth on its profitability. It recommends financial managers to analyze the relationship between a firm's age, size, growth, and profitability before making any decision in the fields of expanding business, renewing assets, manufacturing high-quality products and appointing new employers. In a recession period, managers should not adopt a strategy to achieve high growth in the short run, they should also reduce the size of the firm's operations. These procedures are important for these firms to maintain a balance between growth and profitability. Keywords : Firm's Age, Firm's Size, Firm's Growth, and firm's Profitability. DOI: 10.7176/EJBM/12-5-10 Publication date: February 29 th 2020

Highlights

The firm's size is an important factor in determining its success in obtaining finance in addition to access in large economic production
If it does all efforts to achieve the maximum level of growth, it will achieve the maximum level of profitability
There is no statistically significant effect of firm's age on its profitability at p-value less than 1%

Summary

Introduction

The firm's size is an important factor in determining its success in obtaining finance in addition to access in large economic production. The firm's size represents the quantity and variety of its products, or services and its ability to provide them to customers, according to the concept of large scale production. This involves production at lower costs and maximizing profits. The firm's management often aims to maximize profit in the long run. This study aims to provide some effort in this field, and to test the effect of the firm's age, size, and growth of assets on its profitability. The following parts of the study investigates the study's objective, Problem, Hypotheses, literature review, methodology (population and Study's Sample, data, variables, analytical Model, statistical tools, hypotheses test), discussion the results, recommendations, and references

Objectives

Methods

Findings

Conclusion