Economic Analysis: Theory and Practice

Company's sustainable growth: Relation between life cycle concepts and financial and economic factors, probability simulation

Vol. 16, Iss. 8, AUGUST 2017

Received: 7 July 2017

Received in revised form: 17 July 2017

Accepted: 27 July 2017

Available online: 29 August 2017


JEL Classification: C5, G32, О12

Pages: 1400–1419

Krasil'nikova E.V. Central Economics and Mathematics Institute of Russian Academy of Sciences, Moscow, Russian Federation

Importance The article considers the problem of company's transition to sustainable growth and investigates interrelations of its performance and life cycle phases.
Objectives The paper aims to substantiate the hypothesis about the need to develop a system-integration concept of sustainable growth, taking into account changes in financial and economic characteristics at different stages of life cycle, to identify the impact on the probability of transition to a new stage, to define significant drivers of instability.
Methods I constructed regression logit models based on panel data of public companies to assess the impact of financial and economic factors on company's growth and simulate the probability of unsustainable growth, employed methods of graphical analysis. The probability value is obtained by calculating the partial derivatives of a composite function.
Results The paper states the need to take into consideration the organization's life cycle concept while examining its condition, underpins the expediency of developing a system-integration concept to study company's growth. Using the economic and mathematical methods of analysis, I obtained qualitative and quantitative estimates of influence on life cycle phases, calculated the probability of unsustainable growth depending on financial leverage and slow growth stage.
Conclusions It is important to consider life cycle phases when studying the company's operations. Management should apply the results of probability simulation to create forecasts and scenarios of development, potential threats, and motivating factors.

Keywords: life cycle, development, sustainable growth, probability


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