| Abstract [eng] |
Relevance of the topic. In the modern business environment, firm growth is considered one of the most important factors of competitiveness, business expansion, and long-term business continuity. However, excessively rapid or slow firm growth may lead to financial pressure, operational instability, inefficient allocation of resources, or missed development opportunities. Therefore, increasing attention in financial management is devoted to the concept of sustainable growth rate, which allows the assessment of whether a firm’s growth corresponds to its financial capabilities and stability. In practice, actual firm growth often deviates from the sustainable growth rate, resulting in growth deviation. Although scientific literature mostly emphasizes the negative consequences of such deviation related to higher financial risk or probability of insolvency, some studies indicate that growth deviation may also promote business expansion, innovation, and value creation. Scientific literature usually analyses firm growth and sustainable growth separately; therefore, there is still a lack of studies examining the impact of actual firm growth deviation from the sustainable growth rate on investment efficiency and firm value. Research object – the deviation of firm growth from the sustainable growth rate and its impact on investment efficiency and firm value. Research aim – to determine how the deviation of firm growth from the sustainable growth rate affects investment efficiency and firm value. Main results of the project. The first part of the project revealed that although scientific literature emphasizes the importance of the sustainable growth rate for a firm’s financial stability and performance, both faster and slower than sustainable growth may also be associated with positive outcomes, such as more rapid expansion, greater growth opportunities, or more favourable investor evaluation. Due to differing evaluations in scientific literature regarding how firm growth affects firm performance, as well as the lack of studies specifically examining the impact of deviation from the sustainable growth rate, the need to investigate the effect of growth deviation on investment efficiency and firm value is substantiated. In the second part of the project, analysis of scientific literature and empirical studies showed that firm growth, sustainable growth rate, investment efficiency, and firm value are closely interrelated. Studies emphasize that growth corresponding to the sustainable growth rate is usually associated with more efficient capital allocation, more stable operating results, and higher firm value. However, growth exceeding the sustainable level may not only increase financial risk and reduce investment efficiency but may also be positively evaluated by investors due to greater growth prospects. Meanwhile, slower growth is more often associated with more stable financial management and more efficient resource utilisation. Empirical studies also revealed that the impact of firm growth on investment efficiency and firm value may differ depending on the firm’s financial condition, growth opportunities, and ability to efficiently use financial resources. The third part of the project presents and justifies the selected empirical research methodology. In order to determine how deviation of firm growth from the sustainable growth rate affects investment efficiency and firm value in Baltic listed firms, correlation and regression analyses are performed. Regression analysis results revealed that deviation from sustainable growth has a statistically significant negative effect on return on assets and a statistically significant positive effect on Tobin’s Q ratio, the price-to-book ratio, and the price-to-earnings ratio. After dividing growth deviation according to direction, it was found that growth below the sustainable growth rate has a positive and statistically significant effect on return on assets, while growth above the sustainable growth rate has a statistically significant positive effect only on the price-to-earnings ratio. This indicates that deviation from the sustainable growth rate may reduce investment efficiency through less efficient asset utilisation, while simultaneously increasing firm value due to a more favourable investor perception of future growth prospects. |
