OVERVIEW OF THE INTERNAL FIRM GROWTH AND CORPORATE FINANCE PRINCIPLES - THEORIES, EXPECTATIONS AND APPLICATION OUTCOMES
OVERVIEW OF THE INTERNAL FIRM GROWTH AND CORPORATE FINANCE PRINCIPLES - THEORIES, EXPECTATIONS AND APPLICATION OUTCOMES

Summary/Abstract: Throughout almost a century many theories of firm growth, investments, financial leverage and dividend policy have been developed aiming to capture decisive relations among the crucial firm internal potentials. The extensive literature reveals many determinants influencing firm growth. The expectations of the relations among investment activities, financial structures and dividend policy on one hand and firm growth indicators (value, sales volume, employment, return) on the other hand exhibit clear and simple relations. Though most of the theories excerpt all relations and represent state of the art in the internal growth potentials relation, we may find a bunch of counter-expectations findings in the related literature. Namely, affected by specific circumstances firms behave in different ways with suboptimal use of internal growth potentials. Among the specific circumstances that may affect the national economy, transition, post-recession and underdeveloped financial markets deserve particular research attention and focus. In this paper, we present the existing theories overview, potential challenges of the labelled circumstances and a review of the relations between selected corporate finance principles and firm growth indicators. The research reveals the findings based on the extensive firms’ dataset related to Bosnia and Herzegovina. The findings of this paper might inspire further research efforts, vivid theoretical debate on the causes and consequences of the findings as well as a clear response from the related government bodies responsible for macro-economic development.

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