In SQL Server 7.0, you should set the original size of the transaction log file to a reasonable size to prevent the file from expanding automatically as more transaction log space is required. As the transaction log expands, a new virtual log file is created.
Also, write operations to the transaction log wait while the transaction log expands. Thus, if the transaction log expands too frequently, performance can be affected. Also remember to set the transaction log file growth increment percentage to a reasonable size to prevent it from growing by too small a value. This avoids the need to expand this file constantly.