Is the Growth of Companies Influencing Their Financial Condition Depending on Their Size: S&P 500 Listed Companies Example

Abstract

The goal of this paper is related to the analysis of the earnings per share growth and the financial condition of companies as measured by Altman Z-Score Model and their relation. The research has been carried out on the example of S&P500 Index listed companies. The correlation and OLS panel data models with fixed effects were tested. The results indicate that the relationship between the EPS growth and Altman Z-Score is not linear and the smaller the company, the higher its growth index. In most of cases the growth of EPS influenced the Altman Z-scores in a positive way. On contrary in the group of medium size companies, EPS growth influenced the financial condition in a negative way. The article fills the gap related to the growth, the size and financial condition of the company that can improve if the management of growth is efficient.