Sustainable Growth Rate Model in Indonesia Manufacturing Firms

Authors

  • Vina Christina Nugroho Universitas Pelita Harapan

DOI:

https://doi.org/10.21512/tw.v21i2.6614

Keywords:

sustainable growth rate, manufacturing firms, return on equity

Abstract

Regarding the importance of Sustainable Growth Rate (SGR) calculation for firms as a basic of financial decision, many previous studies had highlighted the variability of SGR calculation. The research’s first objective focused on two methods of SGR calculation and figured out the determinant factors (internal and external) that affect firm’s SGR. One method focused on different determinants of SGR when industry or firm specific aspects were considered. Whereas, SGR (II) focused on determinant of SGR when firms are reluctant to issue new equity. The second objective was to investigate the determinant factors towards SGR in both models. Sample for the research was public-listed manufacturing firms in Indonesia from 2011 to 2019. The result shows that there is significant difference between the two methods, and not to mention that Return on Equity (ROE) becomes the only factor that affect SGR (in both models). The implication is due to the limited amount of time, so the research can only compare two different method of SGR. 

References

Arora, L., Kumar, S. and Verma, P. (2018). The anatomy of sustainable growth rate of Indian manufacturing firms. Global Business Review, 19(4), 1050-1071. https://doi.org/10.1177/0972150918773002.

Babcock, G. C. (1970). The concept of sustainable growth. Financial Analysts Journal, 26(3), 108-114. https://doi.org/10.2469/faj.v26.n3.108.

Escalante, C. L., Turvey, C. G. and Barry, P. J. (2009). Farm business decisions and the sustainable growth challenge paradigm. Agricultural Finance Review, 69(2), 228-247. https://doi.org/10.1108/00021460910978706.

Fonseka, M. M., Ramos, C. G. and Tian, G. L. (2012). The most appropriate sustainable growth rate model for managers and researchers. Journal of Applied Business Research, 28(3), 481-500. https://doi.org/10.19030/jabr.v28i3.6963.

Gardner, J. C., McGowan Jr., C. B. and Moeller S. E. (2011). Using accounting information for financial planning and forecasting: An application of the sustainable growth model using Cola-Cola. Journal of Business Case Studies, 7(5), 9-16. https://doi.org/10.19030/jbcs.v7i5.5599.

Hartono, G. C. and Utami, S. R. (2016). The comparison of sustainable growth rate, firm’s performance and value among the firms in Sri Kehati Index and IDX30 Index in Indonesia Stock Exchange. International Journal of Advanced Research in Management and Social Sciences, 5(5), 68-81. http://www.garph.co.uk/IJARMSS/May2016/7.pdf.

Higgins, R. C. (1981). Sustainable growth under inflation. Financial Management, 10(4), 36. https://doi.org/10.2307/3665217.

Higgins, R. C. (2015). Much growth can firm afford? Journal Financial Management, 6(3), 7-16.

Hou, K. and Robinson, D. T. (2006). Industry concentration and average stock returns. The Journal of the American Finance Association, 61(4), 1927-1956. https://doi.org/10.1111/j.1540-6261.2006.00893.x.

Jarvis, L. P., Mayo, E. J. and Lane, P. M. (1992). Picking winners: Solving an industrial policy problem with a sustainable growth model. International Marketing Review, 9(1), 19-31. https://doi.org/10.1108/02651339210009252.

Kijewska, A. (2016). Conditions for sustainable growth (SGR) for companies from metallurgy and mining sector in Poland. Metalurgija, 55(1), 139-142. https://hrcak.srce.hr/141856.

Mamilla, R. (2019). A study on sustainable growth rate for firm survival. Strategic Change, 28(4), 273-277. https://doi.org/10.1002/jsc.2269.

Mayo, E. J. and Jarvis, L. P. (1992). Excessive growth in the service firm: A strategic marketing planning challenge. Journal of Services Marketing, 6(2), 5-14. https://doi.org/10.1108/08876049210035791.

Platt, H. D. and Platt, M. B. (1991). A note on the use of industry-relative ratios in bankruptcy prediction. Journal of Banking and Finance, 15(6), 1183-1194. https://doi.org/10.1016/0378-4266(91)90057-S.

Platt, H. D., Platt, M. B. and Chen, G. (1995). Sustainable growth rate of firms in financial distress. Journal of Economics and Finance, 19(2), 147-151. https://doi.org/10.1007/BF02920515.

Wang, Z., Kleiner, G., Bragina, Z., Denisov, A. and Steblyanskaya, A. (2019). Russian and Chinese natural gas industries: Perspectives on sustainable growth. International Journal of Public Administration, 42(15-16), 1381-1394. https://doi.org/10.1080/01900692.2019.1645692.

Downloads

Published

2020-12-02