Özet:

There is still not a consensus on ‘which came first; the firm growth or the profitability’. According to some theoretical arguments, growth affects profitability and profitability supports growth. Because empirical evidence can not support the theoretical approaches considerably, this difference between the theoretical predictons and empirical evidences needs newly empirical evidence on Turkish manufacturing firms. Thus, this paper investigates interaction between firm growth and profitability using panel data on 137 Turkish listed manufacturing firms over the period 1997-2012. Using system-GMM (Blundell and Bond, 1998) growth and profit regressions are estimated. According to results there is a statistically significant positive relation between current profits and current growth. The impact of current profits on current growth is much stronger than the impact of current growth on current profits in the case of Turkish manufacturing firms. These results appear to contradict the theories in Industrial Organization which suggests a negative relationship. In addition, the results suggest that lagged profits affect current profits positively and lagged profitability is a significant determinant of current profits. Moreover, the link between current profits and lagged profits is much stronger than the link between current growth and current profits

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