Firms operating in politically and economically constrained environments face significant challenges in maintaining sustainable growth. This study examines the impact of financial failure risk on sustainable growth policies in non-financial firms listed on the Palestine Exchange (PEX) from 2010 to 2023. Using a comprehensive panel data analysis of 32 firms (393 firm-year observations), we employed rigorous diagnostic tests for normality, multicollinearity, cross-sectional dependence, and heteroskedasticity, followed by Hausman specification tests and robust regression analysis with Period SUR (PCSE) estimation. The findings demonstrate a significant impact of financial failure risk on sustainable growth. Among the five models tested, the Taffler (1983) T-score emerged as the most effective predictor in the Palestinian context, followed by the Fulmer H-score. Return on Assets (ROA) was identified as the strongest economic driver of sustainable growth. From an organizational behavior perspective, these findings highlight how managerial risk perception and decision-making under uncertainty shape corporate financial policies and sustainable growth trajectories. The results provide valuable insights for managers, investors, and policymakers, underscoring the need to develop context-specific financial risk management and sustainable growth strategies in constrained economic environments. The study advocates prioritizing short-term financial health monitoring, as captured by the Taffler model, to bolster resilience and guide strategic growth decisions.
