The Effect of Firm Size on Firms Profitability in Nigeria

Abstract

Firms in a market economy vary widely in size, profitability, and survival. What are the factors determining these observed variables and how they operate has been active topic of research in industrial organization and more generally in developing country where Nigeria is one of them. Firm size has been considered as an important determinant of firm profitability. In this study, the effect of firm size on the profitability of manufacturing companies listed in the Nigerian Stock Exchange was analyzed by using a panel data set over the period 2000-2009. Profitability was measured by using Return on Assets, while both total assets and total sales were used as the proxies of firm size. According to the results of the study, firm size, both in terms of total assets and in terms of total sales, has a positive impact on the profitability of manufacturing companies in Nigeria.

Keywords: Firm Size, Profitability, Manufacturing Companies, Nigeria Stock Exchange.