International Journal of Business and Social

International Journal of Business and Social Science

Vol. 2 No. 23 [Special Issue – December 2011]

Sustainable Growth Rate and Firm Performance : Evidence From Iran Stock Exchange

Nasrollah Amouzesh Department of Accounting ,Gachsaran Branch Islamic Azad University Gachsaran , Iran Zahra Moeinfar Zahra Mousavi

Abstract Sustainable Growth Rate and Liquidity and Firm Performance Our paper aims to examine the relation between for a sample of 54 firms listed in the Iran financial market during 2006-2009 . We use a linear regression analysis to examine the association between the deviation of actual growth rate from sustainable growth rate and Return on Assets(ROA) , Price to Book value(P/B), Current and Acid ratios . The study shows that the deviation of actual growth rate from sustainable growth rate is having relationship with ROA and P/B ratios.Also , we find no significant association the deviation of actual growth rate from sustainable growth rate and Current and Acid ratios .

Keywords: Sustainable Growth Rate – Actual Growth Rate –Return on Assets – Price to Book ratio- Liquidity

ratios .

1 . Introduction

As growth requires commensurate increase in assets for support without equity issuance , any asset increases must be funded with added liabilities or from retained earnings . thus if financial policies are unchanged , the rate of shareholder equity growth will limit sales growth . the susutainable growth rate is particulary valuable because it combines operating (profit margin and asset efficiency ) and financial (capital structure and retention rate) elements into one comprehensive measure. Using SGR , managers and investor can begin to gauge whether the firm ' s future growth plans are realistic based on their current performance and policy or not . in this way , SGR can provide managers and investors with insight into the levers of corporate growth . (Pandit and Tejani,2011) The concept of Sustainable Growth Rate was originally developed by C....