A Nonlinear Relationship Between Corporate Size and Profitability

İngilizce (OpenAlex)

Corporate growth is a natural consequence of management's wealth maximization efforts. However, its effects on profitability are not fully understood. This study examines the size-profitability relationship using quarterly data from publicly listed Turkish firms. The findings indicate that size is positively correlated with profitability. However, this relationship is not linear. After reaching a certain point in size, the marginal return becomes negative, raising questions about growth-related decisions. The findings are robust to alternative econometric methods (GMM and FE-OLS), alternative measures of size, and alternative specifications of nonlinearity.