The effect of firm life cycle on profitability: Evidence from Jordanian firms

Abstract

Profitability is an important performance measure and a related study based on the life cycle of firms is appreciated by researchers and managers. The impact of the financial crisis adds novelty to such research. This study discusses the impact of financial ratios on profitability of firms under the influence of financial crises. It is based on a sample of 42 Jordanian firms and uses panel data regression on an annual dataset for the time period 2000-2018. The study found mature stage firms to be explained best with the suggested model. The impact of current ratio on the profitability of all companies was observed as positive while the profitability is found to be negatively affected by debt for all life cycle stages except for the declining stage. Also, it is found that the declining stage firms need to rely on debt to stay profitable and sustain.