Abstract
Firm growth is an important research topic in the academic arena and accepted as a leading indicator of firm’s health. However, the debate as to the determinants of growth has not yet been fully solved. Many studies concocted in developed and developing economies, already attempted to identify the driving forces that spur firm growth. This study investigates how selected factors influence sales growth of firms by employing 22 years of consecutive data on a sample of 243 nonfinancial Standard and Poor’s 500 (S&P500) companies. The empirical findings of panel data analysis demonstrate significant influence of previous year sales growth, average growth rate of relevant industry, firm size, and change in profitability level on the selected proxy of firm growth. Additionally, financial leverage, market-to-book ratio, price-to-earnings ratio, and plowback ratio are not found to have any significant relationship with the growth rate of the firm. A crucial result to emphasize is that the market in which firms operate is the major force that spurs growth, and this impact is captured by the industry growth variable.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Baumol WJ, Heim P, Malkiel BG, Quandt RE (1970) Earnings retention, new capital and the growth of the firm. Rev Econ Stat 52:345–355
Bottazzi G, Secchi A (2006) Explaining the distribution of firm growth rates. Rand J Econ 37(2):235–256
Breusch TS, Pagan AR (1980) The Lagrange multiplier test and its applications to model specification in econometrics. Rev Econ Stud 47(1):239–253
Chan LK, Karceski J, Lakonishok J (2003) The level and persistence of growth rates. J Financ 58(2):643–684
Coad A, Segarra A, Teruel M (2016) Innovation and firm growth: does firm age play a role? Res Pol 45(2):387–400
Damodaran A (2008) The origins of growth: past growth, predicted growth and fundamental growth. Available at SSRN: http://ssrn.com/
Damodaran A (2012) Investment valuation: tools and techniques for determining the value of any asset, vol 666. Wiley, Hoboken, NJ
Evans DS (1987a) Tests of alternative theories of firm growth. J Polit Econ 95(4):657–674
Evans DS (1987b) The relationship between firm growth, size, and age: estimates for 100 manufacturing industries. J Ind Econ 35:567–581
Fewings DR (1975) The impact of corporate growth on the risk of common stocks. J Financ 30(2):525–531
Friend I, Husic F (1973) Efficiency of corporate investment. Rev Econ Stat 55:122–127
Gander JP (1991) Managerial intensity, firm size and growth. Manag Decis Econ 12(3):261–266
Geroski PA (2005) Understanding the implications of empirical work on corporate growth rates. Manag Decis Econ 26(2):129–138
Geroski PA, Machin SJ, Walters CF (1997) Corporate growth and profitability. J Ind Econ 45(2):171–189
Grabowski HG, Mueller DC (1975) Life-cycle effects on corporate returns on retentions. Rev Econ Stat 57:400–409
Hall BH (1987) The relationship between firm size and firm growth in the US manufacturing sector. J Ind Econ 35(4):583–606
Hausman JA, Taylor WE (1981) Panel data and unobservable individual effects. Econometrica J Economet Soc 43:1377–1398
Jensen MC (1986) Agency cost of free cash flow, corporate finance, and takeovers. Am Econ Rev 76(2):323–329
Little IM (1962) Higgledy piggledy growth. Bull Oxf Univ Inst Econ Stat 24(4):387–412
Miller MH, Modigliani F (1961) Dividend policy, growth, and the valuation of shares. J Bus 34(4):411–433
Moreno JDJ, Castillo LL (2011) Corporate growth, age and ownership structure: empirical evidence in Spanish firms. J Bus Econ Manag 12(1):164–196
Ollinger M (1994) The limits of growth of the multidivisional firm: a case study of the US oil industry from 1930–90. Strat Manag J 15(7):503–520
Penrose E (1955) Limits to the growth and size of firms. Am Econ Rev 45(2):531–543
Rufín R (2007) Sales growth of Spanish tourist firms: some implications of Gibrat’s Law on marketing management. Tour Manag 28(3):788–805
Simon HA (1964) Comment: firm size and rate of growth. J Polit Econ 72(1):81–82
Subrahmanya MB (2015) Innovation and growth of engineering SMEs in Bangalore: why do only some innovate and only some grow faster? J Eng Tech Manag 36:24–40
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2017 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Gurbuz, A.O., Ataunal, L., Aybars, A. (2017). The Impact of Selected Firm Features on Sales Growth: Empirical Evidence from S&P500. In: Hacioğlu, Ü., Dinçer, H., Alayoğlu, N. (eds) Global Business Strategies in Crisis. Contributions to Management Science. Springer, Cham. https://doi.org/10.1007/978-3-319-44591-5_25
Download citation
DOI: https://doi.org/10.1007/978-3-319-44591-5_25
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-44590-8
Online ISBN: 978-3-319-44591-5
eBook Packages: Business and ManagementBusiness and Management (R0)