Vikram, Amith
(2015)
The determinants of SMEs high growth: Evidence from Italian Firms.
[Tesi di dottorato]
Abstract
This thesis sets out to provide a contribution to the on-going discussion on determinants of firm growth and its effects on firm growth (measured in sales). However, this study presents additional insights dissimilar to existing research in two ways: 1) The primary goal of the research is to determine the factors which are efficient indicators and predictors of high-growth firms and low growth firms.2) The present study uses an innovative model adopted in credit risk management to identify the predictors of firm’s growth by using a probit regression procedure. Specifically, this paper follows an approach related to Z-score model (Altman, 1968), which forecast the possibility of default by means of a linear combination of financial ratios that differentiate among two different groups of firms: bankrupt and nonbankrupt firms. Various ratios are taken out from the annual statements before the period of default.
This is consistent with the idea that the financial statement at a time (t-1) affects the financial statement at a time (t). The same thought is being used in the present study with the significant difference that the focus is towards firm growth rather firm default. Except for the work (Sampagnaro 2013; Megaravalli, A. 2017), this approach has certainly not been employed from the point of view of firm growth.
The source of data came from the AIDA database, a commercial database provided by Bureau van Dijk. AIDA contains a comprehensive financial information of firms in Italy. For the study, we considered Small and Medium scale enterprise which belong to manufacturing industries and the period from 2012 to 2015: period to determine the high growth firms.2011: This period is the year before the rapid growth. In the study, the period selected for the study is 2011 to 2015 (this period is selected mainly to understand the predictors of firm growth during post-global financial crisis period).
Given the nature of the objective, Probit regression is one of the better statistical instrument which is more oriented to find a dichotomous dependent variable.
The result of the study shows that return on asset is positive and statistically significant for both high growth and low growth firm and accepts hypothesis 1 which argues that profitability affects firm growth positively. this result is also consistent with previous works (Chandler & Jansen ,1992, Mendelson, 2000 and Cowling, 2004). Further, solvency ratio shows the negative relationship for high growth and low growth firm. Further, firm age is negatively connected with firm growth for high growth firms, whereas positive for low growth firm and statistically significant. The result indicates that the chances of being high growth firm (HGF) are higher for young firms. This also confirms our hypothesis 3 which argues that younger firm, more likely that it becomes high growth firm, Whereas for low growth firm it is insignificant
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