European Financial and Accounting Journal
European Financial and Accounting Journal
European Financial and Accounting Journal
Faculty of Finance and Accounting, University of Economics, Prague

European Financial and Accounting Journal 2016/3

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

DOI: https://doi.org/10.18267/j.efaj.160

[full text (PDF)]

Levent Ataünal, Ali Osman Gürbüz, Asli Aybars

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

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