Identifying High Growth SMEs Through Balance Sheet Ratios
34 Pages Posted: 28 Jan 2013
Date Written: January 27, 2013
Abstract
In this paper we trying to discover the balance sheet ratios that enable us to predict which firms are better candidates for a high-growth path. Following the intuition behind the credit scoring model (i.e., Z-score model), we consider the idea that the balance sheet in the period preceding the high growth affects the balance sheet at the time of the exceptional growth. To this end, we used a quantile regression and a TOBIT analysis that discriminates, according to a defined threshold, among the financial data of two groups of firms (High growth and Non-High Growth firms) selected from a population of approximately 21,000 firms. The results of the analysis demonstrate the relevance of firm size, firm age, and, most importantly, internal cash flows (despite bank loans), to the growth and success of a firm.
Keywords: firm growth, financial ratios, quantile regression, z-score mode
JEL Classification: D21, L20, O39
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Explaining National Differences in the Size and Industry Distribution of Employment
By Steven J. Davis and Magnus Henrekson
-
Explaining National Differences in the Size and Industry Distribution of Employment
By Steven J. Davis and Magnus Henrekson
-
The Effects on Sick Leave of Changes in the Sickness Insurance System
By Magnus Henrekson and Mats Persson
-
Wage-Setting Institutions as Industrial Policy
By Steven J. Davis and Magnus Henrekson
-
Wage-Setting Institutions as Industrial Policy
By Steven J. Davis and Magnus Henrekson
-
Employer Size and the Wage Structure in U.S. Manufacturing
By Steven J. Davis and John Haltiwanger
-
Designing Efficient Institutions for Science-Based Entrepreneurship: Lessons from the US and Sweden
By Magnus Henrekson and Nathan Rosenberg
-
Gazelles as Job Creators - A Survey and Interpretation of the Evidence
By Magnus Henrekson and Dan Johansson
-
Industrial Policy, Employer Size, and Economic Performance in Sweden
By Steven J. Davis and Magnus Henrekson