The purpose of this paper is to examine whether corporate governance changes along the corporate life-cycle.
In a sample of 205 firms from 21 emerging market countries and using a life-cycle proxy from the dividends literature, the authors use a governance-prediction model which examines whether corporate governance differs along the corporate life-cycle.
Mature firms tend to practice better overall corporate governance. Discipline and independence improve as firms mature. Firms tend to be most transparent and accountable when they are young. These findings suggest that the resource/strategy and monitoring/control governance functions are relevant but at different life-cycle stages.
In the absence of longitudinal governance data with sufficient coverage to track within-firm changes in corporate governance along the corporate life-cycle, the authors analyze differences in corporate governance between-firms at different life-cycle stages.
The authors use an alternative, yet new measure from the dividends literature to account for the firm’s position along the corporate life-cycle. With this new measure, the findings are in line with the predictions of Filatotchev et al. (2006).
The paper has benefitted greatly from comments from the editor, David Michayluk, two anonymous referees, and seminar participants at NUI Maynooth, Dublin City University, Queens University Belfast, and the University of Limerick. Any remaining errors are entirely the authors own.
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