sustainable growth of public listed … · company’s key objective or a guarantee of value ......

Proceeding of the Global Summit on Education GSE 2014 (E- ISBN 978-967-11768-5-6) 4-5 March 2014, Kuala Lumpur, MALAYSIA. Organized by WorldConferences.net 433

SUSTAINABLE GROWTH OF PUBLIC LISTED COMPANIES (PLC) USING CAPITAL STRUCTURE CHOICES AND FIRM PERFORMANCE IN AN ASEAN MARKET

Norfhadzilahwati Rahim & Noriza Saad

Department Finance and Economics University Tenaga Nasional

[email protected]

ABSTRACT Our paper aims to examine the relationship between sustainable growth, capital structure and firm performance of Public Listed Companies in ASEAN countries. This study using a sample of 229 companies listed in Bursa Malaysia in ASEAN countries which is Malaysia, Indonesia, Thailand and Singapore within a period of 2001 to 2012. We use linear regression model to examine the association between sustainable growth with debt equity ratio (DTER), total equty (TE), total debt (TD), ROA, EPS, and ROC. An ANOVA was used to determine the different of the factors across ASEAN countries. The findings indicate that sustainable growth in Malaysia and Singapore is association with all independent variables for capital structure. And, sustainable growth is association with ROA in all ASEAN countries. Sustainable growth is not differ across ASEAN countries. But, capital structure and performance of companies is differ across ASEAN countries. Field of Research: Sustainable Growth, Capital Structure, Public Listed Companies, ASEAN --------------------------------------------------------------------------------------------------------------------------------------------- 1. Introduction Sustainable growth attaches great importance due to increasing the value of company into one comprehensive measure by combining operating and financial (Jagadish, 2011). The combination of operating and financial such as profit margin, asset efficiency, capital structure and retention rate that mostly have association with sustainable growth (Amouzesh et al, 2011). They already describe four model growth rate models such as Van Horne’s model, Higgen’s model, Zakon’s model and a simple model. Research study by Philips et al (2010) stated that some of financial dynamics affecting firm growth is capital structure and earnings growth is one of the key valuation models. In the long term, the company used to finance by mix of debt and equity known as capital structure. Therefore, the company’s capital structure will remains the same by determining the sustainable growth. Furthermore, the company’s capital structure will consistent by maintain the earnings and increasing its owners’ equity, even though there will be slight year to year deviations in the actual capital structure. Then, sustainable growth will effected when the company’s capital structure changes such as if financial leverage increase its will increase sustainable growth and financial leverage decrease its will decrease the sustainable growth (Jagadish, 2011). Sometimes too much growth rate tends to company causes financial stress (fonseka et al, 2012). Consequently, firm will face higher costs, financial losses, higher debt, declining market share and bankruptcy. But, growth will give benefit in a certain

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level and can improve the financial condition of company. At the same time, firm can sustainable growth for their strategic planning. Other than that, Kanani et al (2013) mentioned that firm growth and risk is one of the important factors in financial information. This is because information can influence in making a decision and to guide an investment. Regarding on Zygadlo and Sloriski (2010), firms can achieved their corporate growth by differentiated goods and services of their customers. Company’s key objective or a guarantee of value creation is one of the company’s growth sales and assets itself. Then, establishment of financial policies will cause the company’s growth will inconsistent. Based on information gathered from Urata (2004), ASEAN must beef up their financial and corporate sectors by making the most sufficient savings; encouraging inventment from overseas and efficient utilization o funds to sustainable a high growth. The ratio of bad loans (which stood at 15.7% in Thailand in June 2003 and a plunge from the post-crisis high of 46.5%) has dropped. Then, capital ratios (which rose to 12.5% in Thailand in June 2003 from the post-crisis low of 9.2%) and profit margins went up. However, banks are not willing to extend loans, not fulfilling their role in the finance brokerage function. Soundness should be further improved through the enhancement of loan screening capabilities, the promotion of sound competition among banks and the introduction of foreign capital. The increment and decrement of company’s profitability, leverage, market efficiency, and others factors will consistent the company’s growth rate. The objective of this research is to examine whether there is relationship between sustainable growth, capital structure and firm performance. Then, we also want to compare the sustainable growth, capital structure and firm performance across market in ASEAN countries. Throughout this study, there is one proxy to represent dependent variables, which is sustainable growth. Otherwise, six proxies to represent independent variables, which are i) Debt to Equity Ratio, ii) Total Equity, iii) Total Debt, iv) Return on Asset, v) Earnings per share, vi) Return on Capital. 2. Literature Review Based on previous researcher in term of sustainable growth and firm performance, Nasrollah Amauzesh et al (2011) examined there are relationship between sustainable growth rate and liquidity and firm performance. The study used a linear regression to examine 54 firm listed companies in the Iran financial market. The result show the deviation of actual growth rate from sustainable growth rate is having relationship with ROA and P/B ratios. Another study (Bivona, 2000) focused on profitable and sustainable growth policy in a changing market. In this study, a company represented by combining three main elements such as structure in terms of resources, management activities and operational activities. The study found that to assessing business growth strategies, a feedback approach could useful support small business entrepreneurs. Then, this feedback approach can comply with profitability level, a desired balance financial structure and external key actors’ requirements. Johnson & Soenen (2003) found that large profitable firms with efficient working capital management and a certain degree of uniqueness regarding their business are the most successful companies with degree of sustainable growth rate high. They mentioned that, one of the key issues in planning the



future successful growth of a company is to grapple with the inherent limitations and constraints of the policy with respect to leverage and dividend payout. The sustainable growth rate is the highest growth rate a firm can maintain without increasing its financial leverage (again see Higgins, 1977). The sustainable growth rate depends only on the earnings retention rate (r) and the return on equity (SG = r ∗ ROE). The higher the sustainable growth, the more financial flexibility to the company has to expand through organic growth or acquisitions. By being able to finance new projects out of retained earnings, the firm can avoid giving a signal to the market about its investment plans and also is less held to the discipline of capital markets. Regarding on leverage of the firms, Korteweg (2009) found that the under leverage result in his study is mainly due to zero leverage firms that also pay dividends. He concludes that the market expects them to lever up in the future to capture the benefits of leverage. Shaikh, Salman (2010) stated that leveraged firms can increase their returns in booms, but in slumps, they lose the edge and can even go bankrupt and make both their shareholders and creditors suffer. In economic booms, leveraged companies are more profitable than non-leveraged companies, but in recessions, leveraged companies are less profitable and hence riskier than non-leveraged companies. Thus, leveraged companies are depending on the assumption that the economic boom will last indefinitely. Then, Dhanapal and Ganesan (2010) found that there have negative relationship between growth rate and financial leverage but has positive relationship with operating leverage. Then, the study also shows the ESGRL is a combined effect of both the leverages between financial leverage and operating leverage. Taking into consideration for firm sustainable growth models and capital structure, Pacurari (2012) concluded that it will increased enterprise value when the financial return above than the cost of capital. Based on financial theory, analysis and interpretation of this value increase can be made on the basis of sustainable growth models. Fonseka and Tian (2012), in a study of 15,377 firms found that common financial characteristics have a higher impact on the direction than the magnitude of SGR. And, a more profitable firm with efficient working capital management, effective investment in fixed assets, and higher taxes receives a higher SGR by Higgins’s than by the H-LSGR model. Iliea & Olaru (2013) claimed that the leverage is amplifying the losses or the gains in business. In good times, leverage is good, it is busting the gains and it supports economic growth. Companies and governments are using leverage at large scale. In bad times, it is busting the losses. Companies and governments will have to deleverage. The high degree of leverage is one cause of a financial crisis and therefore deleveraging is usually following a financial crisis. Deleveraging entails not only risks, but also opportunities, notably the chance to strengthen financial stability. Another researchers based on sustainable growth in emerging markets, Lourenço & Branco (2013) in their study was investigated the factors that drive high levels of corporate sustainability performance in an emerging country, Brazil. The level of said performance is proxied by membership of the Bovespa Corporate Sustainability Index. Using a framework combining stakeholder theory and a resource-based perspective, they was examined that the incentives for Brazilian listed firms to invest in corporate sustainability and develop a number of hypotheses that relate corporate sustainability performance both with operating and with financing characteristics. The results indicated that Brazilian leading



corporate sustainability performance firms are significantly larger and have a larger return on equity than their counterparts, which is consistent with previous findings for US firms. O’Connor (2013) used a sample of 686 investable firms from 26 emerging market countries show that equity market liberalizations do not result in an increase in externally-financed growth rates for participating firms. Firms issue less and not more equity capital post-liberalization and suggest the gains from equity market liberalizations may not be attributable to a reduction in financing constraints. Fatemi & Fooladi (2013) argued that shareholder wealth maximization as a current approach is no longer a valid guide to creation of sustainable wealth. An emphasis on short-term results has had the unintended consequence of forcing many firms to externalize their social and environmental costs. An unwavering faith in markets' ability to efficiently uncover long-term value implications of short-term results has created many unacceptable outcomes. 3. Methodology The intension of this research is to study the association between sustainable growth, performance and capital on public listed companies. So, the sample in this study consists of 229 public listed companies in Bursa Malaysia for twelve years period from 2001 to 2012 on an annual basis. The ASEAN Countries in this research such as Malaysia, Indonesia, and Singapore, Thailand and Philippines and data are collected from Bloomberg in Bursa Malaysia library. In this study, there are two main variables, and the proxies that represent the both variables as shown in Figure 1 below:

Figure 1: Research Framework of Sustainable Growth, Capital Structure and Firm Performance This research study on sustainable growth, capital structure and firm performance, so we use linear regression model to examine the relationship between sustainable growth with debt to equity ratio (DTER), total equty (TE), total debt (TD), ROA, EPS, ROC and ROC . An ANOVA model was used to determine the different of the factors across ASEAN countries.

Independent Variables Capital Structure

Debt to Equity Ratio (DTER)

Total Equity (TE)

Total Debt (TD) Firm Performance

Return On Asset (ROA)

Earnings per share (EPS)

Return on Capital (ROC)

Dependent Variables

Sustainable Growth Rate (SGR)



In addition, several equations that are related to the relationship between all variables of public listed companies in ASEAN countries were estimated. The linear regression equation of each ASEAN countries can be represented as follows:

iiiiiii ROCEPSROATDTEDTERaSGRmalaysi )()()()()()( 654321…….……eq1

iiiiiii ROCEPSROATDTEDTERiaSGRindones )()()()()()( 654321…….….eq2

iiiiiii ROCEPSROATDTEDTERgaporeSGR )()()()()()(sin 654321….....eq3

iiiiiii ROCEPSROATDTEDTERdSGRthailan )()()()()()( 654321………...eq4

iiiiiii ROCEPSROATDTEDTERinesSGRphilipp )()()()()()( 654321……..eq5

In addition to finding evidence on existence of that such relationship, we are also interested in examining is there are significant mean different between Malaysia, Indonesia, Singapore, Thailand and Philippines is justified by explanatory proxies. To achieve the objective, we examine using one-way ANOVA to investigate the mean difference between groups and within groups. 4. Results and Discussion

Table 1 shows general statistics measurements which give us the level of companies’ performance in Malaysia, Indonesia, Singapore, Thailand, and Philippines. These measurements are the Mean, Std. Deviation and Std. Error Mean respectively. Table 1: Descriptive Statistics Results of Public Listed Companies for ASEAN Countries

Country N Min. Max. Mean Std. Deviation

Malaysia

SGR 600 -100.33 97.20 6.8370 9.54744 DTER 600 .00 397.43 41.4916 55.98771 TE 600 1.57 4.56 3.0652 .57578 TD 600 .17 4.51 2.6578 .77463 ROA 600 -20.24 39.11 6.4554 5.82409 EPS 600 -1.10 2.23 .2247 .31086 ROC 600 -7.17 71.53 10.6353 8.24722

Indonesia

SGR 600 -5788.03 192.06 2.9032 237.63996 DTER 600 .00 90946.54 221.6372 3719.12525 TE 600 .00 7.83 5.7168 1.45366 TD 600 -.59 7.41 5.2366 1.65292 ROA 600 -27.08 136.59 8.0745 9.77005 EPS 600 -.11 .45 .0294 .05704 ROC 600 -7.08 75.81 13.5773 10.00765

Singapore

SGR 600 -55.20 66.31 8.4211 9.74248 DTER 600 .00 356.80 26.2082 38.92626 TE 600 .00 4.39 2.4070 .72938 TD 600 -1.39 4.07 1.8496 .89880 ROA 600 -34.48 60.12 7.6555 6.57303 EPS 600 -12.27 6.09 .3748 .87919 ROC 600 -16.01 76.26 12.1505 8.47549

SGR 600 -57.43 128.07 9.7986 15.45275



Thailand

DTER 600 .00 38375.26 118.0303 1572.81124 TE 600 .00 5.52 3.5808 .69673 TD 600 .00 5.09 3.1532 .91660 ROA 600 -26.65 66.72 8.3460 7.53818 EPS 600 -4.07 9.49 .2984 .79968 ROC 600 -8.16 684.02 14.0257 28.64150

Philippines

SGR 348 -82.05 103.59 6.0300 12.50240 DTER 348 .00 1491.29 54.1665 211.62398 TE 348 -.04 5.18 3.2859 1.10926 TD 348 .00 5.28 2.4935 1.40993 ROA 348 -140.96 356.14 2.5411 25.10583 EPS 348 -7.68 15.54 .3618 2.18875 ROC 348 -3.53 573.20 20.8858 80.04199

From the table 1, results of descriptive statistics show that the mean for sustainable growth rate is highest for Thailand (9.7986) follow by Singapore (8.4211), Malaysia (6.8370), Philippines (6.035) and Indonesia (2.9032) respectively implying that in average for 10 years study, Thailand perform better in their sustainable growth as compared with the other countries. By looking at minimum value of sustainable growth results, Indonesia shown a very lowest value (-5788.03) implying the chances of the listed firms facing with business problem or might be insolvency or bankruptcy is high. This is because the change in financial leverage will affect the profitability of companies and at the same time will affect the sustainable growth. Regarding on result capital structure, Indonesia has higher mean on debt to equity ratio (221.6370%) compared with other countries. This is because total equity and total debt (5.7168 million and 5.2366 million respectively) is higher. The lowest debt to equity is Singapore (26.2082%) because total equity and total debt (2.4070 million and 1.8496 million respectively) is lowest compared with other countries. Its can indicate that the increasing in financial leverage can lowers their sustainable growth. However, means results for the other proxies indicate different finding whereby Thailand has highest ROA (8.3460%) compared to Indonesia, Singapore, Malaysia, Philippines and (8.0745%, 7.6555%, 6.4554%, and 2.5411%) respectively since the higher in their sustainable growth rate. Then, EPS for Singapore (RM0.3748) is highest compare to Philippines, Thailand, Malaysia and Indonesia (RM0.3618, RM0.2984, RM0.2247 and RM0.0294 respectively). Other proxies indicated for performance by return on capital market shown that the highest mean is Philippines and the lowest is Malaysia (20.8858% and 10.6353% respectively). For testing the relationship among these variables, it will be discussed through considering the estimations model for the linear regressions analysis. This table 2 is shown below:



Table 2: Linear Regression Results for Sustainable Growth and Capital Structure of ASEAN Countries

Sustainable growth rate (SGR) for equation model 1 in Malaysia, justify there is a significant relationship at 1 percent level with debt equity ratio (DTER), total equity (TE), total debt (TD), return on asset (ROA), and return on capital (ROC). Therefore, null hypothesis was rejected. The association for Malaysian firms is significant to all proxies except earnings per share (EPS). There are positive association between sustainable growth rate (SGR) with debt equity ratio (DTER), total equity (TE), and return on capital (ROC) while negative association with total debt (TD) and return on asset (ROA). The determinate coefficient, R2, is indicating that 18.3% of the variance of SGR is explained by the variances of the independent variables. The F-test statistics is substantiating at the 1% significant level implying that the null hypotheses that the regression coefficient are all zeros can be rejected at the 1% level of significance. Based on results of model equation 2 in Indonesia, the results shown that all firm performance (Return on asset (ROA), earnings per share (EPS) and return on capital (ROC) respectively) have significantly with sustainable growth rate. But, capital structure (debt equity ratio (DTER), total equty (TE), total debt (TD) respectively) is not association with sustainable growth rate. The relationship between sustainable growth and firm performance is not strong relationship due to result R2 only 8.8%. Model equation 3 in Singapore shown similar result with model equation 1 in Malaysia, this study is accepted alternative hypothesis since all proxy indicated have relationship with sustainable growth accepted earnings per share (EPS). The results indicated that debt equity ratio (DTER), total debt (TD), return on asset (ROA), and return on capital (ROC) have positive relationship at 1 percent level. Only total equty (TE) have negative relationship at 1 percent level. Then, Model equation 4 on revealed that all variable significant with sustainable growth at 1 percent level of significant. But, debt equity ratio (DTER) and earnings per share (EPS) for Thailand is no significant relationship with sustainable growth. These results indicated that the changes in debt equity ratio (DTER) and earnings per share (EPS) will not give impact to the growth of companies in Thailand. In Philippines, total equity (TE) and return on asset (ROA) associated with sustainable growth at 1 percent level of significant. Therefore it was explaining a somewhat not strong relationship because only 11.5 percent in the sustainable growth. F-statistics had shown significant value for all variables at 1 percent

Countries → Malaysia Indonesia Singapore Thailand Philippines

IV → SGR SGR SGR SGR SGR

DV ↓ t p t p t p t p t p

DTER -3.383*** 0.001 1.088 0.277 4.219*** 0.000 -1.349 0.178 0.522 0.602 TE -5.460*** 0.000 1.332 0.183 -2.802*** 0.005 -9.500*** 0.000 2.113*** 0.035 TD 4.984*** 0.000 -0.241 0.809 3.137*** 0.002 9.040*** 0.000 0.442 0.659 ROA 9.560*** 0.000 -4.850*** 0.000 6.971*** 0.000 11.286*** 0.000 4.507*** 0.000 EPS 0.289 0.773 -4.241*** 0.000 -0.531 0.595 -.314 0.754 -0.869 0.385 ROC -8.531*** 0.000 5.176*** 0.000 6.478*** 0.000 -3.601*** 0.000 2.432 0.016 R 0.428 0.297

0.639 0.506 0.339 R Square 0.183 0.088 0.408 0.256 0.115 F-value 22.103***

0.000 9.586*** 0.000

68.138*** 0.000

34.059*** 0.000

7.366*** 0.000

Note: **. A relation is significant at the 0.01 level (2-tailed). *. A relation is significant at the 0.05 level (2-tailed).



confident level meaning that the relationship was exists for each model. All the result sustained with other researchers, Nasrollah et al (2011) examined there are significant relationship between sustainable growth rate and liquidity and firm performance. For testing the variation among ASEAN countries, it will be discussed through considering the estimations model for the ANOVA. This table 3 is shown below:

Table 3: ANOVA Comparison

The ANOVA results in the table 3 analyzed the mean square all variables among ASEAN countries. Observed on firm’s sustainable growth, there is no significant mean different for all ASEAN countries. This result revealed that sustainable growth in all countries is no same. The results also same with debt equity ratio is not significant difference with all ASEAN countries. Then, there is significant different on total equity (TE) with all ASEAN countries. In term of profitability, the results on return on assets (ROA) shown that Malaysia have significant difference with Thailand and Philippines. And, Philippines have significant different on return on assets (ROA) with Singapore, Indonesia and Thailand.

Countries

Variables Malaysia -

Singapore

Malaysia -

Indonesia

Malaysia -

Thailand

Malaysia -

Philippine

Singapore -

Indonesia

Singapore –

Thailand

Singapore -

Philippine

Indonesia -

Thailand

Indonesia -

Philippine

Thailand -

Philippine

SGR Mean Difference

-1.58415 3.93375 -2.96161

0.807 5.51791 -1.37746 2.39115 -6.89536 -3.12675 3.76861

Std. Error 6.44069 6.44069 6.44069 7.51678 6.44069 6.44069 7.51678 6.44069 7.51678 7.51678

DTER Mean Difference

15.28343 -180.146 -76.5387

-12.6749 -195.429 -91.8222 -27.9583 103.6068 167.4707 63.86382

Std. Error 109.0475 109.0475 109.0475

127.2668

109.0475 109.0475 127.2668 109.0475 127.2668 127.2668

TE Mean Difference

.65820* -2.65155*

-.51563*

-.22065* -3.30975*

-1.17383*

-.87885* 2.13592* 2.43090* .29498*

Std. Error 0.05513 0.05513 0.05513 0.06434 0.05513 0.05513 0.06434 0.05513 0.06434 0.06434

TD Mean Difference

.80816* -2.57882*

-.49545*

0.16425 -3.38699*

-1.30361*

-.64391* 2.08338* 2.74308* .65970*

Std. Error 0.06681 0.06681 0.06681 0.07797 0.06681 0.06681 0.07797 0.06681 0.07797 0.07797

ROA Mean Difference

-1.20009 -1.61914 -1.89064*

3.91429*

-0.41905 -0.69055 5.11438* -0.2715 5.53343* 5.80493*

Std. Error 0.65785 0.65785 0.65785 0.76777 0.65785 0.65785 0.76777 0.65785 0.76777 0.76777

EPS Mean Difference

0.11085 -107.84244*

-2.7593 -4.73105 -107.95329*

-2.87015 -4.8419 105.08315*

103.11139*

-1.97176

Std. Error 5.69499 5.69499 5.69499 6.64649 5.69499 5.69499 6.64649 5.69499 6.64649 6.64649

ROC Mean Difference

-1.51516 -2.94198 -3.39039

-10.25052*

-1.42682 -1.87523 -8.73536*

-0.44841 -7.30854*

-6.86013*

Std. Error 1.86371 1.86371 1.86371 2.17509 1.86371 1.86371 2.17509 1.86371 2.17509 2.17509



Based on results earnings per share (EPS), there have significant different only country in Indonesia with Malaysia, Singapore, Thailand and Philippines. And, there is significant difference on return on capital (ROC) between Philippines and all other countries (Malaysia, Singapore, Indonesia and Thailand respectively). Meaning that, the sustainable growth and debt equity ratio (DTER) does not give a significant mean different for all ASEAN countries. This result comply with O’Connor (2013) stated that equity market liberalizations do not result in an increase in externally-financed growth rates for participating firms. Firms issue less and not more equity capital post-liberalization and suggest the gains from equity market liberalizations may not be attributable to a reduction in financing constraints. So, result by O’Connor (2013) in emerging markets same with ASIAN markets.

For testing the correlation among ASEAN countries, it will be discussed through considering the estimations model for the Pearson Correlation. This table 4, 5, 6, 7 and 8 is shown below:

Table 4: Pearson Correlation Results of Indonesia

SGR DTER TE TD ROA EPS ROC

SGR 1 .000 -.036 -.017 -.170** -.191** .021

DTER 1 -.074 .045 .034 .130** -.007

TE 1 .550** .061 .346** -.019

TD 1 -.149** .221** -.138**

ROA 1 .440** .653**

EPS 1 .389**

ROC 1

**. Correlation is significant at the 0.01 level (2-tailed).

Table 5: Pearson Correlation Results of Malaysia


SGR 1 -.131** -.096* -.050 .207** .102* .004

DTER 1 .228** .599** -.203** -.107** -.082*

TE 1 .715** -.022 .265** -.039

TD 1 -.193** .106** -.111**

ROA 1 .581** .735**

EPS 1 .507**

ROC 1


*. Correlation is significant at the 0.05 level (2-tailed).

Table 6: Pearson Correlation Results of Philippines

SG DTER TE TD ROA EPS ROC

SG 1 -.072 .210** .105 .284** .024 .097

DTER -.072 1 -.387** .176** -.182** .022 -.025

TE .210** -.387** 1 .507** .314** .251** -.139**

TD .105 .176** .507** 1 .056 .272** -.103

ROA .284** -.182** .314** .056 1 .090 -.012

EPS .024 .022 .251** .272** .090 1 .001

ROC .097 -.025 -.139** -.103 -.012 .001 1


Table 7: Pearson Correlation Results of Singapore


SGR 1 .115** .061 .052 .549** .113** .560**

TDTTE 1 .049 .396** -.190** -.057 -.140**

TE 1 .774** .138** .554** .121**

SLTD 1 -.104* .318** -.075

ROA 1 .339** .772**

EPS 1 .161**

ROC 1

SLG


*. Correlation is significant at the 0.05 level (2-tailed).



Table 8: Pearson Correlation Results of Thailand


SGR 1 -.002 -.118** .109** .340** .079 .096* DTER 1 -.085* .105* -.072 -.022 .007 TE 1 .634** .122** .229** -.044 TD 1 -.068 .125** -.070 ROA 1 .299** .512** EPS 1 .059 ROC 1

**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).

The Pearson correlations results in table 4, 5, 6, 7 and 8 reported all p-value of correlation are relatively low justifiable that no multicollinearity problems exist as mentioned by Gujarati (1995), where when the correlations value exceeded 0.80 mean there have a multicollinearity problems among variables. The correlation results of Malaysia firm’s sustainable growth rate for debt equity ratio (DTER) and total equity (TE) has negatively significant correlated (at 1 percent and 5 percent respectively). And, return on assets (ROA) and earnings per share (EPS) has positively significant correlated with sustainable growth rate (SGR) at 1 percent and 5 percent level significant. In Indonesia, there are negative significant correlated with sustainable growth and return on assets (ROA) and earnings per share (EPS). And, total equity (TE) and return on assets (ROA) correlated with sustainable growth of Philippines firms. For Pearson correlation results of Singapore, all variable shown a significant relationship with sustainable growth rate (SGR) but total equity (TE) and total debt is not correlated with sustainable growth rate (SGR). Debt equity ratio (DTER) and earnings per share (EPS) is not correlated with sustainable growth of Thailand firms. There is a significant correlated for total equity (TE), total debt (TD), return on assets (ROA) and return on capital (ROC) (t=-0.118, t=0.109, t=0.340 and t=0.096 respectively). This results comply with Bivona (2000) focused on profitable and sustainable growth policy in a changing market. The study found that to assessing business growth strategies, a feedback approach could useful support small business entrepreneurs. The feedback approach can comply with profitability level, a desired balance financial structure and external key actors’ requirements. 5. Conclusion and Recommendation In this study, it can be concluded that capital structure has a negative relationship with firm sustainable of all ASEAN firms. The higher the level of capital structure in the company shown that the sustainable growth will decrease. This results comply with Jagadish (2011) found that sustainable growth will effected when the company’s capital structure changes such as if financial leverage increase its will increase sustainable growth and financial leverage decrease its will decrease the sustainable growth (Jagadish, 2011). The high leverage of firm’s capital structure probably good by providing enough capital in the running business operation and too high leverage make it company facing difficulty in their debt management. Sometimes too much growth rate tends to company causes financial stress (fonseka et al, 2012).



Surprisingly, firm’s profitability shown a positive significantly to firm sustainable growth rate. The higher the level of profitability in the company showed that the sustainable growth of companies will increase and comply with Johnson & Soenen (2003) found that large profitable firms with efficient working capital management and a certain degree of uniqueness regarding their business are the most successful companies with degree of sustainable growth rate high. The regression results also were supported by the correlation result whereby the result was shown that all variables correlated to the sustainable growth (SGR). It was recommended that, companies should be able to plan and monitor their level of leverage in business dealing to ensure that the sustainable in their business growth as a pivotal strategy for future transactions and forecasting.

Furthermore, sustainable growth rate (SGR) and debt equity ratio (DTER) results shown that there is no significant different will all ASEAN countries. It’s stated that sustainable growth rate (SGR) and debt equity ratio (DTER) same in the ASEAN markets. The study believes that for future research, the research consist of the different in sustainable growth, capital structure and firm performance between non syariah companies and syariah companies in Malaysia.

References

Jagadish, R. R. (2011). Performance Analysis with Sustainable Growth Rate: A Case Study International Journal of Research in Commerce, Economics and Management Volume, 1(1), 2231-4245. Amouzesh, N., Moeinfar, Z., Mousavi, Z. (2011). Sustainable Growth Rate and Firm Performance: Evidence from Iran Stock Exchange. International Journal of Business and Social Science, 2(23). Phillips, M., Volker, J., Anderson, S.J. (2010). Understanding Small Private Retail Firm Growth using the Sustainable Growth Model. The Journal of Finance and Accountancy. Dhanapal, C., & Ganesan, G. (2010). Enterprise Sustainable Growth Rate Analysis: An Empirical Study. International Conference on Business and Economics, 15-16, March 2010, Malaysia. http://www.internationalconference.com.my/proceeding/icber2010_proceeding/PAPER_242_EntrepriseSustainable. Fonseka, M. M., Ramos, C. G., Tian, G. (2012). The Most Appropriate Sustainable Growth Rate Model for Managers and Researchers The Journal of Applied Business Research, 28(3). Kanani , M. A., Moradi, J., Valipour, H. (2013). Sustainable Growth and Firm Risk from the Signaling Perspective Asian Economic and Financial Review, 3(5), 660-667. Żygadło, K. D., Słoński, T. (2010). Sustainable Growth Rate in the Strategic Analysis of Brewery Industry, Agris On-Line Papers in Economics and Informatics, 2(1). Fatemi, A.M. & Fooladi ,I.J. (2013). Sustainable finance: A new paradigm, Global Finance Journal 24, 101–113.


http://www.internationalconference.com.my/proceeding/icber2010_proceeding/PAPER_242_EntrepriseSustainable

http://www.internationalconference.com.my/proceeding/icber2010_proceeding/PAPER_242_EntrepriseSustainable


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sustainable growth of public listed … · company’s key objective or a guarantee of value ......

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