Predicting above-median and below-median growth rates

Alexander Hölzl () and Sebastian Lobe ()

Review of Managerial Science, 2016, vol. 10, issue 1, 105-133

Abstract: Multiannual periods of consecutive above-median or below-median growth rates in operating performance, called runs, have a substantial influence on firm valuations. For estimating the probability of an above-median or below-median run and utilizing information efficiently, we employ a stepwise regression to automatically identify the parsimonious indicator-specific set of economically and empirically meaningful variables. Our novel approach uses logit models to distinguish firms that will persistently grow above or below the median over a period of up to 6 years. The predictive power for sales growth rates is highest to discriminate between above-median and below-median growth rates, while the future behaviour of operating income and net income growth rates can partially be explained for below-median growth rates. Copyright Springer-Verlag Berlin Heidelberg 2016

Keywords: Operating performance growth rates; Above-median; Below-median; Runs; Prediction; D92; G17; G32 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1007/s11846-014-0145-5

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