JEL classification: L1, M21, C53, G3;
Keywords: high growth firms, prediction, financial ratios;
Abstract: This study attempts to predict high growth firm (HGF) status with financial ratios. Measures related to the firm’s effectiveness in using assets to generate profits, EBITDA margin, debt ratio,
equity-to-debt ratio and return on assets are associated with HGF status. While the financial ratios improve HGF prediction, prediction remains modest (AUC = 0.627). This study suggests it is
difficult to assume a very good HGF forecast from only financial ratios; therefore, the recommendation for researchers and policymakers building models for predicting HGFs is to incorporate
non-financial ratio variables, like the intangible innovation and team-related variables. Finally,
study suggests a standardized reporting of prediction performance metrics in the out-of-sample
and out-of-time simulation for HGF prediction studies.