Exploring the Effects of Volatility on Firm Growth: Do Export Matter?

Abstract

Objective: The objective of the study is to explore the differential impact of micro and macro level volatilities by categorizing firms into exporting and non-exporting firms.

Research Gap: It is the first ever study conducted to explore the heterogeneous impact of volatilities by classifying Pakistan Stock Exchange (PSX) listed firms into exporting and non-exporting firms.

Design/Methodology/Approach: The differential impact of volatility on the basis of exports of Pakistan Stock Exchange listed firms is explored by using two step robust system generalized method of moments.

The Main Findings: We found the differential effects of volatility on firm growth. The impact of industrial and macroeconomic volatility on firm growth of exporting firms is positive. However, it is negative for non-exporting firms. Similarly, market and firm level volatility has a positive (negative) impact on growth of non-exporting (exporting) firms.

Theoretical / Practical Implications of the Findings: It is recommended that the decision makers and firms managers should take into account the heterogeneity of firms (exporting status of the firms) while making decisions.

Originality/Value: The impact of firm, industrial, market and macroeconomic volatility on growth of 419 manufacturing firms listed at PSX is examined by using annual unbalanced panel data over the period 1999-2024.