Asset Growth and Firm Performance: The Moderating Role of Asset Utilization

Abstract

The issue of how asset growth influences firm performance remains a critical topic in corporate finance, particularly concerning the role of asset utilization in maximizing the impact of asset investments. This study aims to examine the direct effect of asset growth on firm performance and assess the moderating role of asset utilization in this relationship. Employing a Moderated Regression Analysis (MRA) on empirical data, the study reveals that asset growth positively and significantly affects firm performance, indicating that increased investment in assets enhances operational efficiency and financial outcomes. Moreover, asset utilization is found to significantly moderate this relationship, suggesting that firms with higher efficiency in utilizing their assets can further amplify the positive effects of asset growth on performance. These findings provide both theoretical and practical contributions. Theoretically, the study emphasizes the importance of asset utilization as a critical factor that strengthens the asset growth–performance linkage, addressing a gap in the existing literature. Practically, the results highlight the need for managers to not only pursue asset growth but also optimize asset utilization to achieve better financial outcomes. Policymakers can use these insights to design regulations that incentivize efficient asset management practices, contributing to sustainable corporate economic growth.