Firm Life Cycle Research Articles

Effects of management effectiveness, firm life cycle, and financial flexibility on firm's performance

Effects of management effectiveness, firm life cycle, and financial flexibility on firm's performance

Firm Life Cycle and Accrual Quality <br>

Firm Life Cycle and Accrual Quality <br>

The Impact of Diversity-in-Board on Investment Efficiency Across the Stages of the Firm Life Cycle in The MENA Region

The Impact of Diversity-in-Board on Investment Efficiency Across the Stages of the Firm Life Cycle in The MENA Region

The impact of economic policy uncertainty on sustainability (ESG) performance: the role of the firm life cycle

PurposeThis study investigates the impact of economic policy uncertainty (EPU) on corporate sustainability [environmental, social and governance (ESG)] performance and aims to explore whether uncertainty-induced sustainability performance is influenced by the firm's life cycle (LC).Design/methodology/approachThe study uses data from European non-financial firms listed during the period from 2002 to 2022 to extend the nascent literature regarding EPU and sustainability performance while applying a dynamic panel data regression analysis (Generalized Method of Moments - GMM System) on 11,462 firm-year observations of 1,869 European firms.FindingsThe authors find overwhelming evidence that policy uncertainty affects the sustainability performance of European firms. The firms restrict their environmental and governance-related activities and address immediate issues to survive during periods of high EPU. Conversely, the firms increase their social engagements to decrease uncertainty-induced information asymmetry. The authors' results show that the intensity and type of sustainability performance are also influenced by the firm's LC. The results imply that board gender diversity (BGD) increases while power concentration with the chief executive officer (CEO) decreases sustainability performance.Practical implicationsThese findings have important implications for policymakers, potential investors, firm management and other stakeholders given the firms' access to resources and preferences to encounter uncertainty vary across different LC stages.Originality/valueTo the best of the authors' knowledge, this is the first study that investigates the role of the firm's LC in the relationship between policy uncertainty and sustainability performance in the European context.

The Effect of Environmental, Social, and Governance (ESG), COVID-19 on Firm Performance with Firm Life Cycle as a Moderating Variable

This research endeavors to present tangible evidence on the impact of environmental, social, and governance (ESG) factors as well as the COVID-19 pandemic on corporate performance, while also considering the moderating influence of the firm life cycle. The conceptual framework applied is the Legitimacy theory, which is utilized to examine the connection between ESG performance, COVID-19, and firm performance. The evaluation of firm performance involves Tobin's Q for assessing firm value and Return on Assets (ROA) for financial performance. Four hypotheses are formulated and subjected to testing. The study utilizes purposive sampling, encompassing all companies listed on the Indonesia Stock Exchange (BEI) between 2017 and 2022, resulting in 235 data observations. The analysis of hypotheses is conducted through the SPSS Statistics 26 application. The findings demonstrate a noteworthy correlation between ESG performance and COVID-19 with financial performance, and the firm life cycle moderates this relationship. However, ESG performance and COVID-19 do not significantly affect market performance or firm value. Additionally, the firm life cycle does not moderate the relationship between ESG and firm value. The implications of the study suggest that ESG factors play a legitimizing role, contributing to an overall improvement in firm performance.

Life cycle stage as determinant of operational efficiency with implications for benchmarking

ABSTRACT We investigate the link between a firm’s life cycle and its operational efficiency and find that operational efficiency first increases and then decreases with the life cycle thus exhibiting an inverted – U shaped relationship. Our empirical examination reveals the relationship holds for subsamples of dividend- and non-dividend-paying firms, with dividend-paying firms displaying higher efficiency scores than their non-dividend-paying counterparts in each life cycle stage. In the literature on benchmarking the moderating role of a firm’s life cycle stage has not been considered. Thus, our findings have empirical significance for efficiency comparison in benchmarking studies. Including the life cycle stage of comparable firms permits a more homogeneous cohort for efficiency comparisons. Consequently, firm policy revolving around capital structure and dividend pay-outs need to take into cognizance that operational inefficiencies could also be a life stage phenomenon rather than agency issues led misallocation of resources. Additionally, we find that when operating efficiency is the variable being studied in a multivariate setting, controlling for the dividend status of a firm reduces omitted variable bias as dividend pay-outs and firm lifecycle are known to be intertwined.

Debt maturity structure, credit ratings and audit fees: new evidence

PurposeThis research aims to revisit Gul and Goodwin (2010), which focuses on exploring the relationship between debt maturity structure, credit ratings and audit fees. Furthermore, the authors investigate whether this association varies based on firm size, firm life cycle and financial reporting quality.Design/methodology/approachTo investigate the research question, the authors use an extended sample period, 2004–2017, in comparison to the sample period, 2003–2006, used in Gul and Goodwin (2010). The authors use ordinary least squares regression as a baseline methodology along with two-stage least-squares regression and change analysis to control for endogeneity concerns.FindingsAccording to Gul and Goodwin (2010), auditors charge lower audit fees for firms with higher short-maturity debt and better credit ratings, indicating a lower likelihood of financial misreporting. Further, Gul and Goodwin (2010) find that lower credit rated firms benefit more from short-term debt. Primarily, the findings are consistent with Gul and Goodwin (2010) and provide further evidence that the beneficial effects of short-maturity debt for firms with poor ratings are evident for small firms, firms in the growth stage of their life cycle and firms with poor earnings quality.Practical implicationsThe findings imply that practitioners in the audit profession and investors should take a more nuanced and comprehensive approach to varied firm and financial factors, taking into consideration the intricate relationships between many elements impacting a firm’s financial health. As a result, audit professionals may give more accurate appraisals of a firm’s financial condition, and investors can make better investment decisions.Originality/valueThe authors reconfirm the findings of Gul and Goodwin (2010) using an extended sample. The findings are novel, which evidence that the lower audit fees for rated firms with short-maturity debt are moderated by firm size, life cycle and financial reporting quality.

Firm's life cycle and cash flow classification: evidence from Indian firms

PurposeThe study examines the influence of a firm's life cycle on the cash flow classification of Indian firms.Design/methodology/approachThe study employs Dickinson's (2011) cash flow patterns to classify firm years under various life-cycle stages. Cash flow classification is employed to measure a firm's classification shifting (CS) practices. The study includes Indian firms listed on the Bombay Stock Exchange during 2012–2020, an ordinary least squares regression model, a fixed-effect model and a panel corrected with standard error regression method.FindingsFirms face different opportunities and challenges at different stages of the firm's life cycle and therefore adopt cash flow CS. The results show that firms adopt cash flow CS during introduction, growth and decline stage of life cycle either to boost or to reduce operating cash flows.Originality/valueThis study is one of its kind to study the influence of a firm's life cycle on the cash flow classification of Indian firms.

연구개발비의 기업가치 평가지표로서의 유효성 연구

[Purpose] This study aims to empirically test whether the relationship between R&D expenditures and firm value depends on firm characteristics such as firm life cycle, technology level, and future growth prospects. Through this study, we also verify the effectiveness of R&D expenditures as an index of firm value evaluation.
 [Methodology] The research model is a modified version of the Ohlson model (1995), and 13,720 financial data of Korean listed firms extracted from KIS－VALUE and TS－2000 are used as samples. The technology level of the firms is classified by Eurostat Indicators, and the future growth prospects are classified according to the book－to－market ratio (BM ratio).
 [Findings] First, when analyzing all firms, we find that growth－stage R&D expenditures are more value－relevant than mature－stage R&D expenditures. However, when firms are divided into four groups (2×2) based on technology level and future growth prospects, we find that growth－stage R&D expenditures are more relevant to firm value than mature－stage R&D expenditures, only the group that satisfies at least one of the high－tech firms or firms with good future growth prospects. For non－high－tech firms and those with poor future growth prospects, there is no significant difference in the value relevance of growth－stage versus mature－stage R&D expenditures. Second, for all firms in the growth stage, we find that R&D expenditures have a greater impact on firm value than net income. Third, when dividing the growth stage firms into four groups (2×2) we find that R&D expenditures is more relevant to firm value than net income only for high－tech firms with good future growth prospects. In conclusion, R&D expenditures is a valid valuation indicator, and its relevance to firm value is higher for high－tech firms that are in the growth stage and have good future growth prospects.
 [Implications] R&D expenditures can be more effective valuation indicator when used in conjunction with the life－cycle stage, technology level, and future growth prospects (BM ratio) indicators. In addition, R&D expenditures can be useful in explaining the growth stock effect, in which high－tech firms in the growth stage or firms with good future growth prospects have market capitalizations that are higher than their underlying value.

The Impact of Diversity-in-Board on Investment Efficiency Across The Stages of The Firm Life Cycle in The Mena Region

The Impact of Diversity-in-Board on Investment Efficiency Across The Stages of The Firm Life Cycle in The Mena Region

Firm Life Cycle and Investment Efficiency in the MENA Region: Comparative Study of Oil Exporting and Oil-Importing Countries

Firm Life Cycle and Investment Efficiency in the MENA Region: Comparative Study of Oil Exporting and Oil-Importing Countries

Retracted] Debt Maturity Structure and Firm Life Cycle: Empirical Evidence from Asean Countries

Retracted] Debt Maturity Structure and Firm Life Cycle: Empirical Evidence from Asean Countries

Turning 30 and myopic? Temporal orientation and the firm lifecycle

AbstractA vast body of literature shows that large, publicly listed firms suffer from managerial short‐termism and inadequate temporal orientation. We study the temporal orientations, measured as the investment horizons, of firms throughout their lifecycles. We build on theoretical arguments from organizational learning theory and agency theory to argue that the relationship between firm age and the investment horizon is quadratic, with an inverted U shape. Using a large sample of publicly listed and privately held European firms, we obtain results consistent with this prediction. Our results support the idea that younger firms gradually learn to use more sophisticated investment decision criteria, thus resulting in longer investment horizons. However, this effect is bounded by changes in governance structure, such as the separation of ownership from control that results from the transition from an owner‐managed status to a professionally managed status. Implications for future research and practice are discussed.

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 Relationship between Family Firm's Socioemotional Wealth and Institutional Compliance of Corporate Governance: The Moderating Effect of Family Firm Life Cycle

The Relationship between Family Firm's Socioemotional Wealth and Institutional Compliance of Corporate Governance: The Moderating Effect of Family Firm Life Cycle

Firm life cycle, asset preferences, and financial performance: Does gender diversity matter?

Objective: This study examines the moderating role of gender diversity in the relationship between asset preferences and firm performance over the firm life cycle. Methods: Panel regression analysis is used to analyse 2008–2019 data of the S&P 500 firms. Results: Results show that gender diversity significantly moderates the relationship between asset preferences and firm performance. Second, this relationship varies across different life cycle stages of the firm. Third, women on board influence this relationship more in the introduction, maturity, and shakeout stages, while female executives have more influence in the introduction and maturity stages. Fourth, gender diversity enhances asset preferences with firm performance but reverses the relationship with many asset categories. Lastly, gender diversity positively moderates firm size relationship with maturity and shakeout stage performance while negatively moderates firm size in the introduction stage. Conclusion: This study has practical implications for firms that diversify their board and management structure to improve performance.

Banks, credit supply, and the life cycle of firms: Evidence from late nineteenth century Japan

How does local credit supply affect economic dynamism? Using an exogenous bond shock in historical Japan and new genealogical firm-level data, we empirically examine the effects of credit availability on firm life cycles. We find that the lifespan of firms decreases with bank capital and that capital-abundant regions have more firm creation and destruction. These effects are amplified for manufacturing, while service sector firms experience no change in longevity and have less creation. Our results suggest that samurai bonds were conducive to the emergence of banking, which eased firms’ financial constraints and led to more capital-intensive investment and economic dynamism.

The IPO Underpricing and Market Liquidity after Reform on Chi-Next Board

This essay examines market liquidity and underpricing of initial public offerings (IPOs) in the wake of the Chi- Next board's financial reform in June 2020. The results show that IPO underpricing has grown and market liquidity has improved since the reform. The channel by which the reform affects IPO underpricing and market liquidity can be explained by investor sentiment. The impact of the reform on underpricing and market liquidity can also be explained by other firm-level characteristics, such as leverage and firm life cycle.

PENGARUH CORPORATE SOCIAL RESPONSIBILITY TERHADAP FINANCIAL DISTRESS DAN SIKLUS HIDUP PERUSAHAAN

PENGARUH CORPORATE SOCIAL RESPONSIBILITY TERHADAP FINANCIAL DISTRESS DAN SIKLUS HIDUP PERUSAHAAN

Firm Age and Financial Performance: The Firm Life-Cycle Theoretical Perspective of Private Limited Companies In Uganda

Purpose: While the financial performance of private companies has invoked intense interest globally, this study aimed to investigate the relationship between firm age and the financial performance of private limited companies in Uganda.
 Methodology: The study adopted a positivist paradigm and a cross-sectional design. A structured self-administered questionnaire was deployed to gather quantitative data from Accountants, Auditors, CEOs, and Board Members who were purposively selected. Three hundred ninety-four private companies in Central and Western Uganda were sampled. The relationship was assessed using Pearson correlation and standard regression analysis techniques.
 Findings: The study established a positive relationship between firm age and financial performance. It was established that firm age accounts for 14% of the variance in financial performance among private limited companies in Uganda. The study recommends that managers prioritize factors that guarantee the long-term existence of businesses by devising sound investment and operational policies that match the life-cycle stages of their firms.
 Recommendations: This study cements our insights on a firm age-financial performance nexus in Uganda’s private sector and highlights the significance of age towards financial performance. Findings provide insights into devising promising business approaches and guide management in setting priorities to achieve long-term business survival and better financial performance.