EVIDENCIA EMPÍRICA DE LA EVALUACIÓN DEL MODELO DE CRECIMIENTO SOSTENIBLE DE HIGGINS EN EMPRESAS MEXICANAS DURANTE EL PERIODO 1998 - 2008

Abstract

For the purpose of this investigation the growth of Mexican companies was analyzed during a period of 1998 to 2008. This study was performed following the growth model proposed by Robert C. Higgins, and it was based on ex-post analysis taking as a sample six companies that were listed in the Mexican stock exchange (MSE). Two types were identified using the Higgins model. The first one in 1977, that was directed towards planning and the other one in 2004 based on the financial analysis and the profitability of the business. Both differ in how Higgins handles the financial reasons to calculate sustainable growth. In his first type, the calculation is based on the objective reasons for paying dividends and leverage rather than on historical figures. He includes in 2004 the amount of total equity, removes the amount of liabilities and changes the arrangement of reasonsing. By making these changes and applying the model on the sampled companies, he generates a completely different outcome between the two types. How inflation is treated to calculate the sustainable growth of companies is another change in the importance of the model. In 1977, Higgins thought that inflation had an unfavorable effect on the assets of the companies and that depreciation on a historical basis was insufficient to recover the value of the assets. In 2004, he changes the assessment, although it is difficult to accept by bankers and financers. This work addresses issues related to the lifecycle of the companies, their products and services, whenever the financial decisions of growth must take into consideration the size, status and strategies of each economic entity. In his proposal of analysis, Higgins (2004) believes that if the decision makers are conscientious people, they should seek to increase the value of the companies through the proper management of growth, without exposing results and feasibility at medium and long terms for an apparently favorable opportunity in the short term. The study considers three basic situations with alternatives of decision in the case of slow growth, excessive growth, and the ideal situation of balanced growth. Higgins model is a useful tool in the planning and management of financial resources of the company; however, empirical evidence shows that when the theoretical assumptions of the model are violated, it generates differences XIII between the figures of balanced growth defined as g* and real historical growth of the company. As in most theoretical models, Higgins’ model of sustainable growth requires adjustments so that the information and conclusions are congruent with reality, especially when the idea is to have consistent information. Such is the case of balanced growth results in which the value cannot be negative numbers; what this means is, that the reasoning behind the payment of dividends cannot be greater than the amount available. Without forgetting the considerations above mentioned, the Higgins model is considered suitable for financial and operational management of a company, as long as the increase in production is not a linear function with respect to fixed assets, but rather with relation to the total assets when it is operating at full capacity. The results obtained allowed to prove that the real growth figures and the calculations of the sustainable growth of these companies during the period of study, do not follow the parameter considered as sustainable or balanced growth and the difference with the real growth is explained by exogenous factors that follow the needs of the sector, market, and organizational strategies. The exogenous elements that were identified include natural phenomena, tariff barriers, government interventions, and legal contingencies.