Sensitivity of Firm Size Measures to Practices of Corporate Finance: Evidence from Shariah Compliant Firms

Syed Danial Hashmi, Saqib Gulzar, Majid Jamal Khan & Muhammad Akhtar
Published Online: December 2018
Abstract

The aim of this study is to analyse the impact of different measures of firm size (total assets, total sales, market value of equity share and total number of employees) on six different practices of corporate finance, namely financial policy, investment policy, diversification, financial performance, corporate governance and dividend policy. Further, study examines the sensitivity of different measures of size towards these practices of corporate finance based on R2, sign and significance of beta co-efficient. Researchers used data from Shariah compliant firms i.e. KMI-30 index (Karachi Meezan index of Shariah compliant firms) for a period of 8 years i.e. 2010-2017. Using panel data analysis technique, the researchers found that in Shariah compliant firms, different proxies of size are differently related with the practices of corporate finance. The results have serious implications for researchers as the study confirms the presence of “measurement effect” in “size effect”. Researchers thus need to be careful when selecting any proxy of firm size for their research using Shariah compliant firms, keeping in mind the scope and context of their work.


Keywords

Firm Size, Shariah compliant firms, corporate finance, sensitivity, practices of corporate finance.