Relationship between Financial Leverage and Firm Growth in the Oil and Gas Industry: Evidence from OPEC

Javadi, Seyed Mohammad; Alimoradi, Abbas; Ashtiani, Mohammad Reza

doi:10.22050/pbr.2017.58117

Relationship between Financial Leverage and Firm Growth in the Oil and Gas Industry: Evidence from OPEC

Document Type : Original Article

Authors

Seyed Mohammad Javadi ¹

Abbas Alimoradi ¹

Mohammad Reza Ashtiani ²

¹ Accounting Department, Tehran Faculty of Petroleum, Petroleum University of Technology

² MA in Oil & Gas Economics, Petroleum Faculty of Tehran, Petroleum University of Technology, Iran

https://doi.org/10.22050/pbr.2017.58117

Abstract

Recent theories of firm dynamics emphasize on the role of financial variables as determinants of firm growth. Most of the technical literature shows that there is a positive relationship between financial leverage and firm growth. The purpose of this paper is to examine whether such relationship exists among oil and gas companies within the Organization of the Petroleum Exporting Countries (OPEC). Data were collected from the selected members of the OPEC. The collected data was then analyzed using the Arellano and Bond (1991) GMM method and Sargan test. The results showed a significant and positive relationship between financial leverage and firm growth which is in line with the technical literature. This research contributes to the body of knowledge by examining a specific and important sector within several different countries. It shows the current theory is not affected by industry or country.

Keywords

Financial Leverage

Firm growth

GMM

Oil and gas industry

OPEC

20.1001.1.26454726.2017.1.1.2.8

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