The possibility of calculating the sustainable growth rate for financially distressed companies according to a proposed model

Abstract

This research aims to suggest a sustainable growth rate model for financially distressed companies. This proposed model is derived from sustainable growth rate model of Higgins (1977). The research hypothesis that (the proposed model achieves the maximum internal growth compared to the Higgins (1977) model. This study utilized a sample of five banks listed in Iraq Stock Exchange for the period 2010 to 2020. The main findings of this study that four banks of the study sample were distressed (Baghdad Bank, Iraqi Middle East Bank, National Bank of Iraq, and Credit Bank). In addition, the modified model of sustainable growth for financially distressed banks is based on a basic principle of retaining profits and not distributing the profit to the bank's shareholders. However, the study recommended that, the banks have to invest their internal money sources better to reduce the risks of external borrowing. Moreover, the financially distressed banks should focus on increasing net profit margin and asset turnover.