A study of profitability and growth determinants: evidences from Indian corporate sector

The main objective of the present study is to identify the determinants of firm's financial performance (both capital market based and accounting based) in Indian context. In the present study the data of a sample of 233 companies is used to evaluate the financial performance measured in terms of growth and profitability using a set of independent variables during the period ranging from 1996 to 2008. The present study reported the size as negative determinant of financial performance measured in terms of cash flow measure, inconsistent with null hypotheses regarding the size. Regarding the public ownership, the empirical results provide credence to negation of hypothesized relationship. It is interesting to note that when financial performance measured in terms of return on capital employed the leverage emerged as significant negative determinant while the hypotheses regarding size, group affiliation and public ownership could not accepted. The study exhibits empirical evidence regarding the acceptance of hypotheses regarding leverage when financial performance measured in terms of return on net worth. The empirical results regarding growth in assets have provided credence to acceptance of null hypothesis regarding age of the sampled firms. On the other hand, the empirical results regarding growth in sales depict age as significant negative determinant leading to acceptance of null hypothesis regarding age. In addition to this, the working capital measure turns out as significant negative determinant of growth in total sales, which is inconsistent with the null hypothesis regarding working capital measure.