A cusp catastrophe model using financial parameters to interpretation of firm growth

The firm growth and its financial parameters have been widely used to interpretation the growth behavior, While their behavior is a non smooth changing that may disrupted by external pressure. Cusp catastrophe theory is a mathematical tool for modeling discontinuous systems whose sudden change behavior is determined by a small number of driving parameters. This study was implementing the cusp catastrophe theory to construct a model of the firm growth, which describes a firm's growth behavior and explain the significant correlation between internal strength and external impact factors. We found the firm whose growth rate was gradually decreased with highly fluctuated, their growth behavior are disrupted then catastrophe behavior occurring. Finally, we using the quantitative method to fit and compare different cusp catastrophe models with other models in statistically principal way. The result shows that the cusp catastrophe model fitting better than other models.