Firm Life Cycle Stages Research Articles

Moderating role of firm characteristics on the relationship between corporate social responsibility and financial performance: evidence from India

PurposeThe effect of corporate social responsibility (CSR) on corporate financial performance (CFP) is shown to depend on both firm-specific and external factors. This study investigates the moderating role of two firm-specific factors – the firm life-cycle stage and ownership structure – on the CSR–CFP relationship in a developing economy setting – India.Design/methodology/approachThe study covers 1,419 listed companies in India during 2015–21. The firm lifecycle is represented using firm age and future growth prospects. Ownership is represented through a dummy variable and promoters’ holding percentages. Return on assets (RoA) is used as a measure of CFP, while CSR intensity, i.e. the ratio of CSR expenditure to profit after tax (PAT), is used to represent CSR. Fixed effect panel regression and generalized method of moments (GMM) models are used for data analysis.FindingsCSR expenditure has a significant negative impact on CFP. Firm age and future growth prospects amplify this negative impact, indicating that the firm life-cycle has a significant negative moderating effect on the CSR–CFP relationship. Furthermore, the impact of CSR on CFP is worse for government companies than private ownership. Promoters’ holdings have a positive impact on the CSR–CFP relationship.Research limitations/implicationsThe results question the validity of mandatory CSR expenditure on companies operating in developing countries and call for a differentiated policy approach to CSR expectations based on firm characteristics. This study also enhances the existing literature on CSR–CFP.Originality/valueThe growing research on CSR–CFP has limited coverage of firm characteristics as contributing factors. Hence, this paper helps in enhancing the existing literature on CSR–CFP and makes it more relevant to firms with specific characteristics.

The Relationship Between Board Gender Diversity, Firm Life Cycle and Corporate Risk-taking

This study examines the impact of board gender diversity on corporate risk-taking, moderated by the firm life cycle stages. Data from 200 non-financial firms listed on the Pakistan Stock Exchange (2018–2022) were analyzed using the system generalized method of moments. Corporate risk-taking, the dependent, was measured using systematic risk and total-risk proxies. Results showed that board gender diversity had an insignificant effect, firm life cycle had a negative significant impact, while the interaction term (board gender diversity and firm life cycle) showed a positively significant impact on risk-taking measured by total risk. In contrast, both factors, along with their interaction, positively influenced risk-taking when assessed through systematic risk. The study further segmented the firm life cycle into five distinct stages, finding that the impact of board gender diversity on risk-taking varied across stages. For instance, at the introduction and maturity stages, board gender diversity positively affected risk-taking for both proxies. However, at the growth and decline stages, its impact was insignificant. These findings suggest variability in the relationship between board gender diversity and risk-taking, potentially influenced by the choice of risk proxies. Theoretically, this study contributes to the body of knowledge on how a firm’s life cycle and board gender diversity influence corporate risk-taking. This study’s insight also holds significant implications for corporate governance and policymaking because, contrary to popular belief, the findings suggest that board gender diversity does not uniformly reduce risk-taking; instead, its impact varies with the firm’s life cycle stage.

ESG dynamics in modern digital world: empirical evidence from firm life-cycle stages

ESG dynamics in modern digital world: empirical evidence from firm life-cycle stages

Firm life cycle and cost of debt

Theory provides several channels linking the corporate life cycle and lending risks. Using a sample of 20,307 firm-loan observations spanning 5,076 publicly traded U.S. firms, we find an economically significant relationship between firm life cycle stage and lending spreads. Based on the Owen and Yawson (2010) life cycle stage classification, young firms are expected to pay at least 15 bps more than mature firms, whereas mature firms pay at least 11 bps more than old firms. According to the Dickinson (2011) cash flow classification, firms in the introduction and decline phases pay lending spreads that are 6 and 12 percent greater than firms in the mature phase. We explore omitted variables bias and instrumental variable estimation in robustness testing to alleviate endogeneity concerns. A mechanism analysis shows that credit risk, systematic risk, and idiosyncratic risk follow the corporate life pattern in accordance with loan spreads, suggesting that banks charge a premium to compensate for risk. Our results support the theoretical prediction that structural changes occur as firms evolve across the corporate life cycle.

The Firm Life Cycle and Debt Maturity Structure: Evidence from ASEAN Countries

This study aims to examine the firm’s debt maturity structure policy across the firm life cycle stage in five ASEAN countries, namely Indonesia, Malaysia, Singapore, Thailand and Vietnam. The Firm life cycle stages are classified based on its cashflow pattern into four stages, namely introduction, growth, mature, and decline. The study was conducted using 2769 samples of non-financial listed companies in these five ASEAN countries in the period 2007-2020. The data analysis method used is a panel data model with a fixed effect. The results of the study from the research conducted show that the company's life cycle in the introduction and growth stages chooses to use long-term debt compared to companies in the mature and decline stages. It’s possible that during introduction and growth stages, firms are overloaded with many investment opportunities that they want to invest. Internal funds might not be enough for them and they opt to acquire external debt such as long-term debt. DOI: 10.26905/jkdp.v27i2.9958

Does firm life cycle stage affect investor perceptions? Evidence from earnings announcement reactions

Does firm life cycle stage affect investor perceptions? Evidence from earnings announcement reactions

Does financial performance follow firm life cycle? Evidence from Indonesian firms

This study aims to determine whether the asset turnover ratio, current ratio, debt ratio and return on net worth influences profitability at each firm life cycle stages in manufacturing companies on the Indonesia Stock Exchange. The study only focuses on introduction stage and growth stage. The classification at each stage of the firm life stages uses the sales growth variable to categorize it. The population in this study are manufacturing companies listed on the Indonesia Stock Exchange for the 2016-2020 period. The sampling technique in this study used purposive sampling technique and obtained a sample of 36 companies. The data analysis method used is panel data multiple regression analysis. The results indicate that at introduction stage only debt ratio and return on net worth that found has a significance influences on profitability. At growth stage almost all independent variable has a significance influences on profitability, except current ratio variable.

Manufacturing servitization in the digital economy: a configurational analysis from dynamic capabilities and lifecycle perspective

PurposeDespite servitization being widely regarded as an essential catalyst to improve manufacturing firms' survival and competitiveness, how to attain servitization remains debatable. The primary objective of this research is to explore whether or not, how, and when the dynamic capabilities affect servitization in the digital economy background. This research investigates the relationships between servitization and dynamic capabilities by incorporating firm ownership, firm lifecycle stage, digital economy level and environmental uncertainty as contingency factors in the research framework.Design/methodology/approachThis research develops and verifies a conceptual framework for manufacturing servitization by employing the fuzzy-set qualitative comparative analysis (fsQCA) in analyzing the secondary longitudinal data from 148 China-listed manufacturing firms involved in servitization from 2015 to 2020.FindingsThe analytical results of fsQCA identify several configurational solutions for the success of manufacturing servitization. Each factor can be an enabler for servitization success despite none of the factors discovered as an absolute condition. Manufacturing servitization success within the digital economy depends on the interactions between dynamic capabilities and contingency factors such as digital economy level, environmental uncertainty, firm ownership, and lifecycle stage.Research limitations/implicationsAll of the construct's measurements in this research adopt secondary data, and further investigation calls for primary data (e.g. survey) for higher validity.Originality/valueThis research extends the current view of servitization by proposing an integrative conceptual framework, allowing manufacturing servitization to be examined more pertinently and comprehensively. Second, the research is an initial attempt that adopts fsQCA in servitization studies. The study sheds light on the mechanisms of attaining servitization by revealing the importance of dynamic capabilities and their interactions with the contingency factors. Third, the research extends the application scopes of dynamic capability theory, firm lifecycle theory, contingency theory, and institutional theory. Fourth, the research findings enrich the understanding of servitization in the digital economy and give business practitioners insights on leveraging dynamic capabilities in different conditions to attain successful servitization under the current circumstances.

Big-4 auditors and audit quality: a novel firm life-cycle approach

PurposeFirm-specific factors such as size, profitability, growth, risk and complexity, in addition to agency-related issues determine both auditor selection and firm life-cycle stage. This paper aims to examine whether and how the effect of Big-4 auditors (B4As) on client firms’ audit quality varies across firms’ life-cycle stages.Design/methodology/approachThe sample comprises 1,813 firm-year observations in India’s emerging economy from 2011 to 2020. The Modified Jones model and Jones (signed, unsigned) model are used to compute discretionary accruals/audit quality. The authors use Koh et al.’s (2015) methodology to determine the firm life cycle.FindingsThe authors’ key findings show that the client firms employing B4As have superior audit quality than those employing non-Big-4 auditors (NB4As). The authors also show that the life-cycle stage significantly impacts the relationship between B4As and a firm’s audit quality. Furthermore, B4A client firms report superior audit quality vis-à-vis NB4A firms only in the birth- and decline-stages. The audit quality of growth- and mature-stage B4A and NB4A client firms is not significantly different.Practical implicationsImplications for managers include the decision to hire B4As. Given that B4As earn a significant fee premium, managers leading birth- and decline-stage firms should hire B4As, while managers of growth- and mature-stage firms should not.Originality/valueTo the best of the authors’ knowledge, this is the first paper to examine the moderating effect of the firm life-cycle stage on the selection of B4As and their impact on audit quality.

Firm life cycle stages and earnings management

Firm life cycle stages and earnings management

Financial Distress, Firm Life Cycle, and Corporate Restructuring Decisions: Evidence from Pakistan’s Economy

This study examines the influence of financial distress on corporate restructuring decisions and whether this restructuring varies across the Firm Life Cycle (FLC) stages of Pakistani non-financial listed firms for the 12 years from 2005 to 2016 inclusive. FLC stages and financial distress are measured using the Dickinson model and Altman Z-score, respectively. Corporate restructuring is segregated into equity and debt restructuring. The data are analyzed using a panel logistic regression model. The results reveal that financial distress is negatively associated with corporate debt restructuring decisions and positively associated with corporate equity restructuring decisions. Further analysis shows that new, growing and mature firms have positive associations with equity restructuring decisions and negative associations with debt restructuring decisions, while declining firms prefer debt restructuring. This study has important implications for corporate managers and policy makers.

Pengaruh Life Cycle Perusahaan Terhadap Tax Avoidance Pada Emiten Bei Periode 2017-2019

The study aims to prove the relationship between the firm's life cycle stages and tax avoidance. This study uses Dickinson (2011) model as the proxy of the life cycle stages, which based on cash flow patterns. The sample in this study are 195 companies engaged in the manufacturing sector that listed on the Indonesia Stock Exchange (IDX). The results of regression model shows that firm life cycle stages have a significant determinant on the tendency of companies do tax avoidance. This study is expected to be useful for management, investors, and academics as a guide to make a better decision.

Firm Life Cycle Stage and Dividend Payout of Listed Non-Financial Firms in Selected Sub-Saharan African Countries: A Sectoral Analysis

This study explored the sector-wise effect of firm life cycle stage on dividend payout of listed non-financial firms in three selected Sub-Saharan African countries that include; South Africa, Nigeria, and Kenya. The study utilized longitudinal and causal research designs. Four hundred and seventy-nine (479) non-financial companies in eleven (11) sub-sectors listed on Nigerian, Johannesburg, and Nairobi Stock Exchanges make up the population. However, the Utility sector was removed from the final analysis because the sample size for this subsector was not enough to carry out the system GMM analysis. Thus, analysis was done for ten (10) subsectors. Two hundred and thirty-nine (239) quoted non-financial firms in ten (10) sub-sectors were chosen and data were collected for the period 2007 to 2017. The dynamic panel data regression technique (system generalized method of moments) was used for the data analysis. The outcomes of the empirical analysis revealed that the earned/contributed capital mix exerts a direct and significant effect on the payout of dividend in seven out of the 10 subsectors analyzed while firm age exerts an inverse and significant effect on the payout of dividend in six out of the 10 subsectors analyzed. The study concludes that the firm life cycle stage influences payout of the dividend of listed non-financial companies in the selected Sub-Saharan Africa countries. The study recommended among others that stock market regulators in the selected Sub-Sahara Africa countries should consider the life cycle stage of the firms and the earned/contributed capital mix should be used in measuring the maturity of firms, thus the payment of dividend by firms should be based on when its profitability and growth rate are expected to fall in future.

Corporate sustainability performance throughout the firm life cycle: Case of Egypt

The role of corporations in society is an age-old debate among practitioners and academics. The corporations’ primary goal is to excel, prosper, and expand financially is no longer suitable for the community. Unfortunately, the need for financial prosperity leads to hazardous workplaces, chemical exposure, and urban decay. Therefore, companies now view internal and external corporate responsibility as a critical business strategy for sustainable management. Thus, examining the impact of firm life cycle stages on business activities, notably sustainability programs and CSR investments, can shed light on a company’s CSR initiatives and sustainability choices. This study uses 420 firm-year data samples from 2013 till 2018 in examining the association between CSR proxied by corporate sustainability performance (CSP) index and firm life cycle for firms listed in the S&P/EGX ESG index. A thorough search of the relevant literature shows that this is the first study to demonstrate this association in Egypt empirically. Our findings show a significant relationship between CSP and firm life cycle stages. The results also show that the firm life cycle has greater explanatory power for CSP levels than previously thought. Therefore, organizations should choose and implement CSR initiatives based on their life cycle stage to ensure long-term value and growth

Innovation decisions through firm life cycle: A new evidence from emerging markets

This paper empirically evaluates how different firm life cycle stages influence managers while making firms' input and output innovation decisions under asset liquidity constraints, idiosyncratic risk, and cash flow risk. We find that firms make more investments in input innovation activities during the introduction, growth, and decline stages in the presence of more asset liquidity; in contrast, less investment is made during the mature stage. Concerning the output innovation, the introduction and decline (growth and mature) stages show a negative (positive) relationship for more asset liquidity in place. Our findings also predict that firms are more likely to invest in input innovation activities during the introduction, growth, and decline stages under more idiosyncratic and cash flow volatilities; however, such investment is less prospective during the mature stage. Both volatilities support reciprocal linkages for firm output innovation. Aside from moderating effects, the firms' asset liquidity positively affects output innovation opportunities during current and future periods, while idiosyncratic and cash flow volatilities negatively contribute to both firms' input and output innovation. These findings not only assist managers in making firms' innovation decisions but also enhance investors' understanding of making investment decisions through the different firm life cycle stages.

The Relationship between Corporate Social Responsibility Reporting and Firm Performance and the Moderating Role of Firm Life Cycle Stages: Evidence from China

This study aims to investigate the relationship of firm performance and corporate social responsibility reporting and the moderating role of a firm’s life cycle stages in Chinese listed companies. We used the sample of all A-share listed firms on the Shanghai and Shenzhen stock exchanges for the period 2010 to 2020. The authors used pooled ordinary least squares (OLS) regression as a baseline methodology. Our regression results show that positive Corporate social responsibility (CSR) activity significantly reduces the performance of the firm. In addition, the negative link between positive Corporate social responsibility and a firm’s performance is more pronounced for firms in mature life cycle stages. Our results are robust to alternative proxy measures of ROA for firm performance, corporate social responsibility reporting, and life cycle stages. To control the possible problem of endogeneity, we use a one-year lag and 2SLS least squares regression. We find that firm performance has a statistically significant influence on CSR reporting. Moreover, we see that firms with high performance are more likely to report CSR activities than low-performance firms. Additionally, six out of ten control variables (Independent Director, Board Shares, State Owned Enterprise, Board Meeting, Chief executive officer Duality, and Firm Growth) have positive influences on CSR reporting. These findings hold for a set of robustness tests. Our results have implications for the development of CSR reporting in developing countries such as China. Our research suggests that, in China, firms with better financial performance undertake more CSR reporting. This paper contributes to the existing literature by investigating the effect of firm performance on CSR reporting and the moderating role of a firm’s life cycle stages in Chinese listed companies. Additionally, this paper enriches the current literature on CSR reporting and highlights the importance of a firm’s financial performance for better environmental performance and reporting.

Technology-intensive ventures, R&D capability and innovation success: impact of firm lifecycle stage and CEO involvement

ABSTRACT The present study examines the relationship between a technology-intensive venture’s R&D capability and innovation success under the moderating influence of firm lifecycle stage and involvement of the CEO. Utilising a sample of 291 technology-intensive Korean SMEs, we find this relationship is strengthened during the growth lifecycle stage of the firm, and especially under the involvement of the CEO in the R&D process.

Managing Institutional Logic Hybridization Process: A Strategy-Timing Contingency Approach

Hybrid organization research is witnessing prosperity. However, we know little about hybrid organizations that are “made”, namely, those transited from original single-logic to dual/multiple-logic forms through logic hybridization. As an example, we focus on the “familization” transition of lone-founder firms, during which single market-logic organizations integrate family logic and evolve to market-family hybridity, and examine buffering approaches to manage organizational destabilizations in this transition. We find financial slack and founder reputation, representing for unfitness- and discontinuity-buffering strategies respectively, could loosen the positive relation between familization transition and TMT turnover rate (i.e., organizational destabilization). Meanwhile, as field-level density of market-family hybridity (i.e., family ownership) evolves dramatically during our observation window, the relative effectiveness of the two buffering strategies also varies. On industry level, following family ownership density grows, the moderation effect of financial slack becomes weaker while the moderation effect of founder reputation becomes stronger. Our findings suggest logic-hybridizing likely happens in transition phase between firm life-cycle stages, and propose to manage organizational destabilization by a strategy-timing (evolution) contingency view.

Strategic Leadership in SMEs: The Mediating Role of Dynamic Capabilities

Small and medium-sized enterprises (SMEs) play a vital role in the United States and throughout the global economy, spurring innovation and job creation. This study investigates the effect of strategic leadership practices on SME performance. We conducted a quantitative survey among leaders of 290 SMEs to examine their strategic leadership and how it affects SME performance. The mediating role of employee empowerment dynamic capability (EEDC) and resilient dynamic capability (RDC) are explored. The results suggest that strategic leadership effect on firm performance is fully mediated by employee empowerment dynamic capability as well as resilient dynamic capability. The contingency role of firm life cycle stages are also examined and empirical results support the notion that the mediating role of dynamic capabilities become more pronounced as SMEs transition from the early stages to later stages of their life cycle.

Outside directors, firm life cycle, corporate financial decisions and firm performance

We investigate whether directors with multiple outside board directorships are related to corporate financial strategy across firm life cycle stages. Using a large sample of firms from the Gulf Cooperation Council (GCC) countries, we find that when the number of directors with multiple board seats increases, firms' level of cash holdings rises, capital expenditure declines, selling, general and administrative (SG&A) expenses increase, and firm performance decreases. We further demonstrate how the relationship varies across different stages of their life cycle. Our findings have significant implications for policy makers, regulators and stockholders in GCC countries and in other emerging markets.