Description
Title: Sustainable Growth Rate and ROE Analysis: A PRAT Model-Based Applied Study on Saudi Banks
Abstract: By using a sample of Saudi banks from 2010 to 2019, this study aims to test the impact of the PRAT model’s and Robert Higgins’ basic model’s components on the rate of sustainable growth. According to Higgins, the PRAT model is a thorough model that calculates the sustainable growth rate using the profit margin (P), retention rate (R), asset turnover (A), and leverage (T). Multiple regression analyses were performed using the Pooled Model (PEM), the Fixed Effect Model (FEM), and the Random Effect Model to test the relationship between the study variables (REM). The findings demonstrated that all of the PRAT model’s parameters have an impact on sustainable growth (profitability margin, retained earnings, asset turnover, and financial leverage). Furthermore, the application of Higgins’ fundamental model demonstrates how retained earnings and the rate of return on equity impact sustainable growth. The validity of the fixed effect model for determining the relationship between the variables of the PRAT model and Higgins basic model is seen when drawing comparisons between statistical measurement models and examining the validity of these models.
Keywords: PRAT model; ROE; pooled effect model; fixed effect model; random effect model
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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