Measurement of Economics to Scale in Corporates of Tehran Stock Exchange

Subject Areas : Financial and Economic Modelling

Vahid Mahmoudi ¹ , Mohammad Hossein Ghaemi ² , Hossein Kazemi ³

1 - Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin, Iran.
2 - Faculty of Social Sciences, Imam Khomeini International University, Qazvin, Iran
3 - Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin, Iran.

Received: 2019-06-09 Accepted : 2019-09-04 Published : 2019-10-01

Keywords: Economics to scale, Nonlinear behavior of costs, Production function,

Abstract :

One of the most important effective factors in the economic growth is the increased efficiency of manufacturing sectors. Thus, it is necessary to review and measure the efficiency of business units from a variety of dimensions to plan the increase of efficiency in future courses. One of these dimensions is the economics to scale (ES) referring to the concept of enhanced earnings due to the increased manufacturing unit, which may be of an increasing, fixed or decreasing trend. ES can be measured through economic production functions. This paper has applied Translog production function to measure corporates' ES. Therefore, data of 105 manufacturing corporates have been collected during 2008-2017. With regard to linearity between independent variables, the elastic net regression method has been used. Results indicate that some industries are of increasing economics to scale trend and some have a decreasing ES. Results can be applied in order to plan and determine the appropriate production level in the management accounting of corporates.

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