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The dynamic relationship between growth and profitability under long-term recession : The case of Korean construction companies

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  • The dynamic relationship between growth and profitability under long-term recession
  • Yoo, Seungkyu; Kim, Jaejun
  • Multidisciplinary Digital Publishing Institute


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Title The dynamic relationship between growth and profitability under long-term recession
Similar Titles
Sub Title

The case of Korean construction companies

Material Type Articles
Author(English)

Yoo, Seungkyu; Kim, Jaejun

Publisher

[Basel]:Multidisciplinary Digital Publishing Institute

Date 2015-12
Journal Title; Vol./Issue Sustainability:Vol. 7(No. 12)
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Economic Conditions
Industry and Technology < Construction
Holding MDPI

Abstract

We conducted an empirical analysis of the dynamic relationship between growth and profitability for small- and medium-sized construction companies that faced long-term economic stagnation in Korea. The period of the analysis spanned 2000 to 2014, and the full period was divided into two halves: before the 2008 global financial crisis and after it. Our empirical model was based on the system generalized method of moments model, and 264 construction companies were used as the study sample. The results of the empirical analysis are as follows. (1) A profitability-driven management strategy limits company growth, thus prolonging the economic downturn; (2) When the macroeconomic environment is relatively stable, high growth in the previous period fosters profitability in the current period. This implies that the phenomenon of dynamic increasing returns is present in the Korean construction industry, and learning through growth enhances productivity and profitability. (The rest omitted)