*Professor & Head, Punjab School of Economics, Guru Nanak Dev University, Amritsar
**Assistant Professor, S.D. College, Hoshiarpur and Research Scholar, Punjab School of Economics, Guru Nanak Dev University, Amritsar
Online published on 27 September, 2019.
This study investigated the growth-profitability interrelationship for Indian Agro Based Firms. Using panel data for a period of twenty two years (1995–2016) and Arellano and Bond (1991) two step GMM estimation procedure, it was found that profits were important source of growth of firms. Further, direct relationship from growth to profitability and from age to profitability and growth signified that firms benefited from scale economies overtime. However, indirect relationship between size and growth of the firm implied that as firms grow in size they tend to sacrifice growth.
The findings also has important policy implication that corporate profits, particularly of agro based firms, should be taxed very cautiously as profits were pre-condition for growth. Further, direct relationship between age and profitability for small firms seemed to suggest that efforts should be made to setup more small scale agro firms as they can profitably exploits the market conditions.
Agro-based firms, Arellano and Bond (1991) GMM estimation system GMM, Growth, Profitability, Panel Data
