Corporate Life Cycle Research Articles

Manufacturing Corporate Life Cycle and Discretionary Accruals with Piecewise Linear Model

<p>This study aimed to investigate the effect of life cycle at the critical point of the growth mature and mature-stagnant stages of discretionary accruals and the effect of company age on discretionary accruals. In addition, this study also examines the differences of discretionary accruals in growth-mature stage and mature-stagnant stage. The data observation in this study is financial statement data of 341 manufacturing companies listed on Indonesia Stock Exchange in 2015-2017. The dependent variable is discretionary accruals that focuses on the piecewise linear model and the independent variables are the life cycle and the company age. Life cycle grouped into two critical point stages, namely the growth-mature stage and the mature-stagnant stage. Multiple linear regression is used to test hypotheses. The results show that there is a negative effect on growth-mature and mature stagnant in critical points of the discretionary accruals and there is a positive effect on the company age on discretionary accruals. Moreover, this study also proves that there are differences in discretionary accruals at growth-mature stage and mature-stagnant stage.</p>

Financial Subsidy, Corporate Lifecycle and R&D Innovation

There is great uncertainty in the effect of financial subsidy on enterprise innovation, which is reflected in the difference in the effects during different lifecycle stages. Based on the theory of financial subsidy’s influence on enterprise innovation and the theory of enterprise lifecycle, this paper demonstrates the different effects of financial subsidy on R&D innovation when enterprises are in different lifecycle stages. Moreover, using the data of listed companies in the A-share market of China from 2013 to 2017, the paper finds that there are significant differences in the impact of financial subsidy on enterprise innovation through the fixed effect model and hierarchical multiple regression. Therefore, financial subsidy for enterprise innovation is important and should be differentiated to different life cycle enterprises.

The Effect of an Acquirer’s Life Cycle Stage on the Performance of M&As: Evidence from Mega and Non-Mega Deals in the US

A substantial body of academic literature continues to investigate whether M&A deals create or destroy shareholdervalue and what are the main determinants of M&A performance, but the results are still inconclusive. In this paper, weinvestigate the impact of corporate life cycle on M&A performance from the perspective of acquiring firms.We shed additional light on the performance of M&A deals from the perspective of bidders’ life cycle stages and thedeal size . We single out mega deals, where activity remains upbeat, and compare their effects on M&A performancewith the effect of non-mega transactions. In contrast to previous studies in the area, we identify four life cycle stages(introduction, growth, maturity and decline), whereas the existing literature mostly focuses on three life cycle stages.Our sample includes 2413 US domestic M&A deals from 2003 to 2017, and consists of 386 mega deals and 2027 nonmega transactions. The data for analysis were obtained from Capital IQ, Bloomberg and Thomson Reuters Eikondatabases.Based on the event study method and regression analysis, we find that stock market reaction is positive for M&A deals inthe US and this reaction is more favourable for non-mega acquisitions than for mega M&A deals. We show that nonmega deals outperform mega transactions for acquirers at the introduction and growth stages of the business life cycle.Our results also indicate that benefits for shareholders from acquiring firms decrease on average with the lifecycle of anorganisation, but the returns for shareholders are positive in both cases. By contrast, in mega deals, shareholders receivenegative returns when the acquiring firm is at introductory life cycle stage.The scientific novelty of this paper is reflected in our contribution and expansion of the scope of research in this field.There is a relative scarcity of analysis examining M&A deals from the perspective of life cycle stage, and our addition of afourth category of analysis in this area, along with a focus on the value of the deal, expands the range of methodology forfuture research. This research is open to further expansion in different markets and our methodology is readily adaptablefor the addition of further analytical variables. Importantly, with the validation of our research hypotheses and theconfirmation of significant results, we provide a useful new tool for managers and professionals engaged in M&A dealsto actively gauge and forecast practical implications of their deals.

Narrative disclosures, firm life cycle, and audit fees

This study examines the relationship between narrative disclosure properties in terms of readability, optimism, and ambiguity of annual reports and audit fees, and how the relationship changes across firms' various life‐cycle stages. Using 54,883 observations for the years from 2000 to 2016, we find that these textual disclosure properties have positive audit pricing consequences. We suggest that narrative disclosure properties play an important role in estimating audit risk, and thus in audit fees. We further posit that the audit fee consequences of these disclosure characteristics vary across different phases of a client firm's corporate life cycle. Though we observe that with a decrease in readability and an increase in optimism and ambiguity of disclosure language that audit fees increase in the introduction phase, a firm's entry to the growth phase moderates the influence of these narrative disclosure features on audit fees. However, the impact of these lexical features on audit fees increases as client firms switch (1) from the growth phase to the maturity phase and (2) from the maturity phase to the decline phase. Based on these findings, we argue that, when examining the audit fee implication for management's disclosure strategies, researchers should treat client firms as dynamic evolving entities.

R & D Intensity and Dividend Policy: Evidence from South Korea’s Biotech Firms

In this paper, we examine the relation between a firm’s research and development (R & D) intensity and dividend payout policy with a focus on biotech firms in a sample of 18,253 firm-year observations in South Korea. We find that biotech firms’ R & D intensity is negatively related to dividend payout. Furthermore, for biotech firms, increased internal cash holding accomplished via a lower dividend policy is positively associated with long-term corporate value. In particular, this study reports that the relation between biotech firms’ cash holding and corporate firm value is significantly positive in firms with high stock dividends. Moreover, it shows that non-biotech firms in the maturity stage of the corporate lifecycle tend to distribute cash dividends, a practice that is relatively uncommon among biotech firms in an R & D steady state.

A Study on the Influence of Corporate Real Estate and Firm Value in the Corporate Life Cycle

A Study on the Influence of Corporate Real Estate and Firm Value in the Corporate Life Cycle

Corporate governance and life cycles in emerging markets

Whereas the corporate life cycle hypothesis says firms follow structured goals along their life cycle, others argue that corporate governance objectives vary independently of predetermined life cycle stages. This study examines the impact of the corporate life cycle on corporate governance in emerging markets, where firms can self-select into stricter rules by adopting an exchange listing level that fits the governance needs of the organization independently of life cycle requirements. We find the listing-level decision is a better predictor of corporate governance quality than corporate life cycle. Firms signal improvements in corporate governance by bonding to more stringent regulation; they determine the corporate governance quality that matches their needs at any point during their life-cycle.

Corporate life cycle, corporate governance structure, and corporate social responsibility disclosure

The existence of Law No. 40/2007 concerning Limited Liability Company (or UU PT) in Indonesia can be an external motivation of the companies to ensure the conduct of corporate social responsibility (CSR) activities. In addition, the internal factor of the company can both drive and inhibit the conduct of CSR activities, such as the corporate life cycle. This study aims to determine the effect of the corporate life cycle, board of commissioners, and board of directors toward the disclosure of corporate social responsibility activities in manufacturing companies listed in Indonesian Stock Exchange. The corporate life cycle is categorized into five stages, including introduction, growth, maturity, decline, and shake-out. To accommodate the possibility of a non-linear corporate life cycle stage, the study employed multiple linear regressions and ANOVA analysis. The results showed that the corporate life cycle and board of commissioners have a significant effect on the disclosure of corporate social responsibility; while the board of directors has no effect on the disclosure of corporate social responsibility. The control variables used in this research include profitability, firm size, slack, research and development, market-to-book ratio, and firm age. JEL Classification: M12, M14, M41 DOI: https://doi.org/10.26905/jkdp.v23i3.2694

기업수명주기에 따른 이익조정이 기업가치에 미치는 영향

기업수명주기에 따른 이익조정이 기업가치에 미치는 영향

Private placements, market discounts and firm performance: the perspective of corporate life cycle analysis

This study looks into the role of corporate life cycle on market discounts and firm performance in private placements. Using the standard event study methodology with 1854 private placements, this study finds that issuing firms on average offer discounts to their investors. While growth firms obtain higher returns around the issuance of private placements, these growth firms generate poor long run post-announcement returns. The results suggest that investors may be over-optimistic to future prospects for growth firms. As old firms generally obtain higher returns in premium offers, the evidence suggests that managers of old firms would put more efforts in managing their firms after private placements. Overall, the evidence indicates that corporate life cycle can play a role to influence firm performance in private placements. The empirical findings shed lights on the importance of corporate life cycle on firm performance in private placements.

The Corporate Life Cycle and the Cost of Equity

Abstract A widely used methodology for estimating the beta of companies with the Capital Asset Pricing Model (CAPM) uses comparable firms based only on industry or sector classifications (Bancel, F., and U. R. Mittoo. 2014. “The Gap between the Theory and Practice of Corporate Valuation: Survey of European Experts.” Journal of Applied Corporate Finance 26, no. 4 (Fall): 106–17. doi:https://doi.org/10.1111/jacf.12095, 112; KPMG. 2017. “Cost of Capital Study 2017: Diverging Markets, Converging Business Models.” Accessed September 28, 2018. https://assets.kpmg.com/content/dam/kpmg/ch/pdf/cost-of-capital-study-2017-en.pdf, 37). We hypothesize that even within industries, there is a significant relationship between the cost of equity and the life cycle of a firm. We argue that these variables are correlated because different life-cycle stages exhibit different degrees of systematic risk. Therefore, as the firm moves along its life cycle, its unlevered beta decreases. We define the stages of the firm life cycle based on a modification of the theoretical typology of (Miller, D., and P. Friesen. 1984. “A Longitudinal Study of the Corporate Life-Cycle.” Management Sciences 30 (10): 1161–83. http://www.jstor.org/stable/2631384, 1162–3) and then classify a sample of listed companies into these stages using (Dickinson, V. 2011. “Cash Flow Patterns as a Proxy for Firm Life-Cycle.” The Accounting Review 86 (6): 1969–94. doi:https://doi.org/10.2308/accr-10130) cash flow statements methodology. We construct value-weighted portfolios that are formed based on our life-cycle stages classification, adapting the procedure of (Fama, E., and K. R. French. 1993. “Common Risk Factors in the Returns on Stocks and Bonds.” Journal of Financial Economics 33 (1): 3–56. doi:https://doi.org/10.1016/0304-405X(93)90023-5). Finally, we compare the betas (levered and unlevered) of these portfolios to determine whether there are statistically significant differences. Our results show clear evidence of a relationship between betas and the corporate life cycle and that this relationship is robust to both changes in the period of analysis and omitted variables bias (when controlling with the four-factor model of (Carhart, M. M. 1997. “On Persistence in Mutual Fund Performance.” The Journal of Finance 52 (1): 57–82. doi:https://doi.org/10.1111/j.1540-6261.1997.tb03808.x). We believe our results show an important shortcoming in a widely used methodology among practitioners for estimating the CAPM.

EARNINGS MANAGEMENT PADA TITIK KRITIS PERUBAHAN TAHAP LIFE CYCLE: STUDI EMPIRIS PADA PERUSAHAAN MANUFAKTUR DI INDONESIA


 
 
 Corporations pass every stage of their life cycles through different ways. At each point of these stages a company has the possibility to turn into decline. When this occurs, a company has the incentive to manage earnings in order to maintain its performance reflected in reported earnings. The objective of this study is to examine whether earnings management choices are different in corporate life cycles from growth to mature and mature to stagnant. The differences in earning management behaviour were indicated by negative and positive discretionary accruals. The sample was taken from manufacturing firms listed on the Indonesia Stock Exchange (2006 to 2013) in different life stages. The results show that firms in growth-mature and mature-stagnant did manage earnings through discretionary accruals, as indicated by significant differences as compared to those in other corporate life cycles.
 
 

Is Bankruptcy Risk Tied to Corporate Life-Cycle? Evidence from Pakistan

In this paper we analyze the relationship between bankruptcy risk and the corporate life cycle in Pakistan from 2005 to 2014. For this purpose, we run a Hierarchical Linear Mixed Model (HLM) for a sample of 301 non-financial listed firms in 12 different sectors. The empirical outcomes reveal that firms during introduction, growth and, decline stages (mature stage) of life-cycle experience higher (lower) bankruptcy risk. Moreover, in juxtaposition with growth stage, bankruptcy risk is higher at the introduction stage of life-cycle. These findings suggest that financial managers should be cautious about the financial fragility of the firm at each stage of corporate life-cycle. The results also entail that Pakistani firms do not follow a sequential pattern in their life-cycle, rather they have the tendency to revert to a previous stage or jump to the next stage of life-cycle. This is the first study that empirically examines the association between firm life-cycle stage and corresponding bankruptcy risk and asserts that managers must incorporate the life-cycle effects into their financial planning and decision making for the sustainable working of an enterprise.

Do institutional investor and group, firm and time effects matter in enterprise performance in the corporate life cycle?

AbstractCorporations undergo growth, maturity and decline, stages which form the corporate life cycle. This study discusses the influence of group, firm and time effects on enterprise performance v...

The Analysis of Corporation Life Cycle and Sustainable Management by the Manager of Human Resource

The Analysis of Corporation Life Cycle and Sustainable Management by the Manager of Human Resource

How Corporate Governance Influence Dividends on Different Corporation Lifecycle Stages

«Вестник Санкт-Петербургского университета. Экономика» — научно-теоретический рецензируемый журнал, обобщающий результаты исследований ученых всего мира в различных областях науки, включая мировую экономику, историю развития экономики и экономической мысли, финансы, кредит и страхование, теорию и практику управления, статистику и учет, экономико-математическое моделирование.

Study on the Slow-Release Effect of Social Responsibility on Financing under the Node of Enterprise Life Cycle

Abstract The relationship between corporate social responsibility (CSR) and financing effect is an important dimension for the quality analysis of Chinese manufacturing industry. The thesis intends to integrate social responsibility factors with the development nodes of manufacturing lifecycle, and dynamically investigates the impacts of financing needs, financing capacity differences, financing options, and financing constraint relief effects of different corporate lifecycle nodes. Then, the thesis makes a logic relationship analysis on the degree and ways of the CSR factors to ease financing constraint of different corporate lifecycle nodes, and designs the analysis framework for companies of each lifecycle node to make use of CSR factors to relieve the effects of financing constraint. Therefore, the literature on the spatial effects of Chinese manufacturing CSR is used to demonstrate the rationality of the analysis framework, and this thesis combines stakeholder theory to describe the framework.

Corporate life cycle, CSR, and dividend policy: empirical evidence of Indonesian listed firms

Purpose This paper aims to examine the association between corporate social responsibility (CSR) and corporate life cycle as well as dividend policy in Indonesia. Design/methodology/approach The paper develops two hypotheses that are tested empirically through multivariate settings. The tests are conducted using a sample of 527 Indonesian listed firms and 923 Indonesian firm-year observations between 2008 and 2015. Findings The findings support the hypothesis that CSR expenses increase when firms enter the maturity stage of their life cycle. On the triple bottom line components of CSR, firms which invest on CSR economic are in their maturity stage of their life cycle. The evidence also suggests that firms’ social donation and charitable giving increase as firms become mature. Furthermore, the strong evidence supports the hypothesis that firms’ CSR expenses positively affect dividend policy. This finding is robust to the alternative measurement of dividend payout, additional firms’ characteristics and instrumental variable to address endogeneity. Practical implications For investors in Indonesian listed firms, it is more profitable to invest in socially responsible firms than socially irresponsible firms. For firms, the results imply that spending in CSR does not reduce performance, thus becoming attractive for investors. Originality/value To the best of the authors’ knowledge, there is thin literature investigating the relation between corporate life cycle, CSR, and dividend policy in emerging markets while it is important as it could encourage companies to integrate CSR into their business strategy and transparently disclose their CSR activities. Further, as previous research on these topics mainly conducted using the US data (Rakotomavo, 2012; Benlemlih, 2014; Hasan and Habib, 2017), which most of CSR disclosures are voluntary, this paper contributes to the existing literature by examining these topics in a country where CSR is mandatory by the law.

Different time, different tone: Company life cycle

This paper examines how the qualitative characteristics of annual reports vary across different phases of the corporate life cycle. We measure the complexity, tone, and sentiment of 10-Ks, and classify firms into their distinct life cycle phases. Considering a sample of 24,268 firm-year observations from 2000 to 2014, we find that each of the life cycle indicators is a determinant of different textual characteristics. The results show that firms’ 10-K disclosures become less complex, less ambiguous, and more optimistic as they progress from the introduction to the maturity stage. Clarity and readability peak at the maturity level, prior to firms entering the final decline stage, characterized by the most negative and ambiguous disclosures. This paper provides timely evidence to regulators and investors on the circumstances under which firms provide qualitatively different disclosures and shows that the textual characteristics of firm disclosure are not static over life cycle stages.

The Effect of Financial Flexibility in Corporate Life Cycle Stage on Firm Performance

The Effect of Financial Flexibility in Corporate Life Cycle Stage on Firm Performance