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Does High Growth Create Value for Shareholders? Evidence from S&P500 Firms

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  • Levent Ataünal
  • Ali Osman Gürbüz
  • Asli Aybars

Abstract

This paper investigates the relationship between growth rate and shareholder value creation, using a sample of 243 non-financial Standard and Poor's 500 (S&P500) companies, which have 22 years of consecutive data available (1993-2014). Sustainable Growth Rate Model (SGR) is used to divide the sample into two groups as high growth firms and moderate growth firms. Using Panel data approach, it is shown that sales growth below sustainable growth rate (SGR) enhance shareholder value at a significantly higher rate compared to growth above sustainable growth rate. The findings suggest that shareholder value creation maximizes around sustainable growth rate and decreases sharply once SGR exceeded.

Suggested Citation

  • Levent Ataünal & Ali Osman Gürbüz & Asli Aybars, 2016. "Does High Growth Create Value for Shareholders? Evidence from S&P500 Firms," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2016(3), pages 25-38.
    • Handle: RePEc:prg:jnlefa:v:2016:y:2016:i:3:id:160:p:25-38
    DOI: 10.18267/j.efaj.160
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    Cited by:

    1. Bojana Vuković & Teodora Tica & Dejan Jakšić, 2022. "Sustainable Growth Rate Analysis in Eastern European Companies," Sustainability, MDPI, vol. 14(17), pages 1-21, August.
    2. Camelia Oprean-Stan & Ionica Oncioiu & Iulia Cristina Iuga & Sebastian Stan, 2020. "Impact of Sustainability Reporting and Inadequate Management of ESG Factors on Corporate Performance and Sustainable Growth," Sustainability, MDPI, vol. 12(20), pages 1-31, October.

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    More about this item

    Keywords

    Firm growth; Panel data analysis; Sales growth; Shareholder value creation; Sustainable growth rate;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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