Determinants of the Sustainable Growth Rate: Evidence from A Panel of Western European Industrial Firms

Growth is arguably one of the crucial indicators of a firm’s success. After all, it reflects a firm’s capability to generate revenue and attain profitability to survive and thrive in the long run (Hada, 2020; Utami et al., 2018). A judicious f inancial manager presumably attempts to formulate financial strategies for the company that align with pragmatic growth expectations. In other words, if a company masquerades by growing well beyond its financial and operational capacity, it may end up in spiraling debt, escalating costs, declining profitability, loss of market competitiveness, and in the worst possible scenario, the risk of insolvency. On the contrary, if a company grows too slowly, it might face stagnation and eventually lose its competitive position as well (Y. Ahmeti et al., 2024; Manaf et al., 2018; Singh & Rahman, 2021). Therefore, it is of paramount importance for a firm to grow sustainably without significantly altering its optimal capital structure, in order to remain competitive and profitable in the foreseeable future (Vuković et al., 2022).

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