Firms Output Growth And Financial Ratios

Abstract

The central focus of this paper is on the relationship between output growth of the firm and its financial ratios. The analysis is based on managerial theories of the firm, in particular, on Baumols (1967) article that suggests sales revenue maximization as a goal of the firm instead of profit maximization. A cross-section equation was estimated for three Brazilian industries covering the year 2000. We regress a firms output growth on a constant and a vector of financial ratios. The results obtained from ordinary least-squares regressions show firms with good financial performance present higher output growth.