Do profit margins expand for high growth firms?

Ertan, A, Lewellen, S and Thomas, J (2020) Do profit margins expand for high growth firms? Journal of Management Accounting Research. ISSN 1049-2127 (In Press)

Abstract

It is common in business analyses to invoke different efficiencies generated by scale. Growth is associated with declining average costs/sales and rising profit margins. Factors cited include the relatively fixed nature of some costs, increased bargaining power, and network effects. We investigate how different cost lines evolve for a sample of US firms after their IPO. To our surprise, costs/sales do not generally decline and margins do not increase, even during the early years when growth is highest. We observe similar results for other samples of domestic and overseas firms, both public and private. We explore possible explanations for our results and discuss implications, especially for cost allocation and financial projections.

More Details

Item Type: Article
Subject Areas: Accounting
Additional Information:

© 2020, American Accounting Association

Subjects: C > Costs
F > Fixed costs
M > Marginal costs
E > Economies of scale
Date Deposited: 14 Feb 2020 09:53
Last Modified: 07 Apr 2020 20:29
URI: https://lbsresearch.london.edu/id/eprint/1373
More

Export and Share


Download

Accepted Version - Text
  • Restricted to Repository staff only

Statistics

Altmetrics
View details on Dimensions' website

Downloads from LBS Research Online

View details

Actions (login required)

Edit Item Edit Item