Digest Finance

Sustainable Corporate Growth: Relationship Between Life Cycle Concepts and Financial and Economic Factors, Probabilistic Modeling

Vol. 22, Iss. 4, DECEMBER 2017

Received: 7 July 2017

Received in revised form: 17 July 2017

Accepted: 27 July 2017

Available online: 19 December 2017


JEL Classification: C5, G32, О12

Pages: 425–436


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

Importance The article considers the issue of the company's transition to sustainable growth and investigates the trade-off of its performance and life cycle phases.
Objectives The research aims to substantiate the hypothesis stating that a system integration concept of sustainable growth should be developed in line with changes in financial and economic characteristics at different phases of life cycle. I also identify an impact on the probability of transition to a new phase and determine significant drivers of instability.
Methods I construct logistic regression models based on panel data of public companies to assess the impact of financial and economic factors on corporate growth and model the probability of unsustainable growth. I apply graphical analysis methods. The probability is assessed by calculating partial derivatives of a composite function.
Results The research 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 evaluate and quantify an impact on life cycle phases, calculate the probability of unsustainable growth depending on financial leverage and slow growth phase.
Conclusions and Relevance It is important to consider life cycle phases when studying the company's operations. Management should adhere to probabilistic modeling results in order to create forecasts and scenarios of development, potential threats, and motivating factors.

Keywords: life cycle, development, sustainable growth, probability


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