n African Finance Journal - Firm growth in inflationary environments




The purpose of this paper is to demonstrate the extent to which and under what conditions inflation is most harmful to firm growth. A framework is developed which allows international comparison of the differential effects of inflation on firm growth. An empirical multivariate model was used to test the assumed relationships. We conclude that inflation always affects growth in a negative manner. Further, operating and financial policies can be used to either extend or retard the overall impact of inflation on the firm?s performance. A data set of firms? financial statements over a ten-year period in New Zealand, Mexico and Brazil was assembled which permitted an examination of the impact of inflation on a firm?s financial performance during periods of high- and low-inflation.


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