European Financial and Accounting Journal 2016, 11(3):25-38 | DOI: 10.18267/j.efaj.160

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

Levent Ataünal1, Ali Osman Gürbüz2, Asli Aybars3
1 Levent Ataünal; Istanbul Aydin University, Faculty of Economics and Administrative Sciences, Inonu Cad. No: 38, Kucukcekmece 34295, Istanbul, Turkey, <leventataunal@aydin.edu.tr>.
2 Ali Osman Gürbüz; Istanbul Commerce University, Faculty of Business, Imrahor Cad., No: 90, Beyoglu 34445, Istanbul, Turkey, <ogurbuz@ticaret.edu.tr>.
3 Asli Aybars; Marmara University, Faculty of Business Administration, Ressam Namik Ismail Sok., No: 1, Bahcelievler 34180, Istanbul, Turkey, <asli.aybars@marmara.edu.tr>.

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.

Keywords: Firm growth, Panel data analysis, Sales growth, Shareholder value creation, Sustainable growth rate
JEL classification: G30, G32

Published: October 1, 2016  Show citation

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Ataünal, L., Gürbüz, A.O., & Aybars, A. (2016). Does High Growth Create Value for Shareholders? Evidence from S&P500 Firms. European Financial and Accounting Journal11(3), 25-38. doi: 10.18267/j.efaj.160
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