The Effect of Firm Size on Financial Performance of Firm: Evidence from the Non-bank Financial Institutions of Bangladesh

Abstract

This paper intends to find out the effect of the factors determining the firm’s size on the financial performance of a firm. Non-bank Financial Institutions (NBFIs) play a predominant role as a supplement to the banks by providing financial aid to society. The positive financial growth of the NBFIs certainly attaches value to the economic growth of any country. That’s why the article endeavors to investigate whether size has an impact on the profitability of the NBFIs of Bangladesh. To conduct the analysis, relevant data from all the non-bank financial institutions listed on Dhaka Stock Exchange (DSE) have been taken from the year 2012 to 2021. Pooled OLS regression has been used to find out the relationship between financial performance measured by Return on Asset (ROA) and Return on Equity (ROE) and the factors determining the size of a company (total asset, total sales, number of employees, number of branches) and some other profitability determining factors (age of a firm, and percentage of independent director of a firm). According to the analysis, a firm’s size-specific factors have a positive impact on the profitability of a firm.

Keywords: size, ROA, ROE, profitability, total asset, total sales, non-bank financial institutions.

DOI: 10.7176/RJFA/14-4-04

Publication date: February 28^th 2023