Determinants of Financial Performance and Sustainable Growth Rate: An Empirical Study in Emerging Markets
Teguh Erawati(a*), Reni Listyawati(b), Achmad Fijai(c), Resti Kristina Dewi(d), Fatikhah Fila Dina(e), Maghfirotus Shafira(f)

a,b,c,d,e,f) Faculty of Economics, Universitas Sarjanawiyata Tamansiswa, Indonesia
*teguh_erawati[at]ustjogja.ac.id

Abstract

Sustainable Growth Rate (SGR) is crucial for a company^s sustainability as it reflects the level of growth achievable without seeking external capital. This study aims to analyze the effects of profitability, liquidity, and company size on financial performance and their impact on the company^s SGR. Data for this research was sourced from companies listed on the Indonesia Stock Exchange (IDX) between 2019 and 2023, with purposive sampling yielding 2365 company observations. The study employs multiple regression analysis to assess the relationships between the variables. The findings reveal that profitability has a positive and significant influence on both financial performance and SGR, while liquidity and company size do not significantly impact financial performance. Furthermore, financial performance is shown to positively and significantly affect SGR. The novelty of this research lies in its direct investigation of the link between financial performance and SGR within Indonesian firms, providing fresh insights into this unique context. By exploring the effects of key financial variables, this study offers a deeper understanding of how companies in emerging markets can foster sustainable growth. The study^s implications suggest that corporate managers should prioritize improving profitability as a vital factor in enhancing financial performance and driving sustainable growth. While liquidity and firm size do not contribute significantly in this context, profitability proves to be an essential factor. From the perspective of Stakeholder Theory, the research underscores that improving financial performance benefits not only shareholders but also all stakeholders, supporting the company^s long-term sustainable and stable growth.

Keywords: Profitability- Liquidity- Company Size- Financial Performance- Sustainable Growth Rate

Topic: Economics