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Book part
Publication date: 12 November 2016

Haiyan Zhou, Hanwen Chen and Zhirong Cheng

In this paper, we investigate whether internal control and whether corporate life cycle would affect firm performance in the emerging markets of China.

Abstract

Purpose

In this paper, we investigate whether internal control and whether corporate life cycle would affect firm performance in the emerging markets of China.

Methodology/approach

We use Chen, Dong, Han, and Zhou’s (2013) internal control index on the effectiveness of internal control and Dickinson’s (2011) definition on firm life cycle. We use multivariate regression analysis.

Findings

We find that the internal control improves corporate performance. When dividing firm life cycle into five stages: introduction, growth, mature, shake-out and decline, we find that the impacts of internal control on firm performance vary with different stages. The positive impact of internal control on firm performance is more significant in maturity and shake-out stages than other stages.

Research limitations/implications

Our findings would have implications for the regulators and policy makers with regards to the importance of internal control in corporate governance and the effectiveness of implementing standards and guidelines on internal control in public firms.

Practical implications

In addition, our findings on the various roles of internal control at different stages of firm life cycle would help managers and board of directors find more focus in risk management and board monitoring, respectively.

Originality/value

Although the prior literature have examined the link between internal control, information quality and cost of equity capital (Ashbaugh-Skaife, Collins, Kinney, & LaFond, 2009; Ogneva, Subramanyam, & Raghunandan, 2007), our study would be the first attempt to investigate the link between internal control and firm performance during different stages of firm life cycles.

Details

The Political Economy of Chinese Finance
Type: Book
ISBN: 978-1-78560-957-2

Keywords

Abstract

Details

Servitization Strategy and Managerial Control
Type: Book
ISBN: 978-1-78714-845-1

Article
Publication date: 26 October 2021

Manish Bansal

The study aims to examine the impact of the firm life cycle on the misclassification practices of Indian firms. The study also examines the impact of International…

Abstract

Purpose

The study aims to examine the impact of the firm life cycle on the misclassification practices of Indian firms. The study also examines the impact of International Financial Reporting Standards (IFRS) on the misclassification practices of Indian firms.

Design/methodology/approach

The study uses Dickinson (2011) cash flow patterns to classify firm-years under life cycle stages. Two forms of misclassification, namely revenue misclassification and expense misclassification have been examined in this study.

Findings

Based on a sample of 19,268 Bombay Stock Exchange (BSE) firm-years spanning over ten years from March 2010 to March 2019, results show that firms operating at high (low) life cycle stage are more likely to be engaged in revenue (expense) misclassification, implying that firms substitute between the classification shifting tools depending upon ease and needs of each tool. Further, our results demonstrate that the magnitude of expense shifting has been significantly increased among test firms (firms reporting under IFRS) relative to benchmark firms (firms reporting under domestic GAAP) in the post-IFRS adoption period, implying that adoption of IFRS negatively affects the accounting quality of Indian firms.

Research limitations/implications

The study considers only two main forms of misclassification, namely revenue and expense misclassification. However, future research may explore the cash flow misclassification.

Practical implications

The findings suggest that standard-setting authorities make more mandatory disclosure requirements under IFRS to curb the corporate misfeasance of classification shifting.

Originality/value

First, the study is among the earlier attempts to examine the impact of the firm life cycle on misclassification practices. Second, the study explores the unique Indian institutional settings concerning the phased-manner implementation of IFRS and examines its impact on the classification shifting practices of firms.

Details

Journal of Applied Accounting Research, vol. 23 no. 3
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 26 May 2021

Ajid Ur Rehman, Tanveer Ahmad, Shahzad Hussain and Shoaib Hassan

The purpose of this paper is to investigate how corporate cash holdings changes across firm life cycle and how firms undergo heterogeneous dynamic cash adjustment as they…

Abstract

Purpose

The purpose of this paper is to investigate how corporate cash holdings changes across firm life cycle and how firms undergo heterogeneous dynamic cash adjustment as they advance from one stage to the next stage.

Design/methodology/approach

This study uses an extensive data set of 2,994 Chinese A-listed firms. The authors use generalized method of moments (GMM) and Fisher Panel unit root testing to investigate the targeting behavior of Chinese firms.

Findings

The uni-variate investigation reveals that firms in the growth stage exhibits the highest cash levels and firms in the decline stage report the lowest cash levels. As growth firms have high investment needs, they may require raising external capital to meet investment needs. To avoid the costly external financing, firms in growth stage tend to hold more cash. The GMM estimation reveals that along all the phases of firm life cycle there are evidences of trade-off behavior of corporate cash holdings. The authors report that adjustment rate increases as firms enters into the growth stage.

Practical implications

The findings provide both theoretical and practical insight to align cash policies with the available strategic choices along firm life cycle in an emerging market characterized by market imperfections.

Originality/value

The study is unique from the context that it is applying robust methodology to one of rarely investigated area in corporate cash policy. The peculiar Chinese study setting characterized by higher information asymmetry, high cost of external financing and heterogeneous access to financing sources provide theoretical and empirical underpinnings to investigate and gain insight about how corporate cash policy can be aligned with strategic choices available across different stages of life cycle.

Details

Journal of Asia Business Studies, vol. 15 no. 4
Type: Research Article
ISSN: 1558-7894

Keywords

Article
Publication date: 9 March 2021

Tifanny Dwijaya Hendratama and Yu-Chuan Huang

This study extends related research on corporate social responsibility (CSR) into the less-researched realm of Southeast Asia setting by investigating the role of life

Abstract

Purpose

This study extends related research on corporate social responsibility (CSR) into the less-researched realm of Southeast Asia setting by investigating the role of life cycle stages on the relationship between CSR and firm value.

Design/methodology/approach

This study uses a sample of 1,247 firm-year observations of firms listed in Southeast Asia from 2012 to 2018. Descriptive, multiple regression and sensitivity analyses are presented in the study.

Findings

The results provide evidence that although CSR and firm value, in general, have a positive relationship, the relationship is contingent on the stages of firm's life cycle. The effect of each CSR dimension on firm value differs across life cycle stages. The social dimension of CSR predicts higher firm value at the introduction and mature stages. The governance dimension affects firm value at the growth and shake-out/decline stages. Moreover, the environmental dimension affects firm value only at the later stage of the life cycle.

Research limitations/implications

This study is limited to five countries in Southeast Asia, namely Indonesia, Malaysia, Philippines, Singapore and Thailand from 2012 to 2018. Future studies may explore other countries and investigate the impact of country classification on the relationship between CSR and firm value.

Practical implications

Policymakers, managers and other decision-makers may have a better understanding of firm's behavior in different life cycle stages. With such understanding, CSR will be successfully adopted in decision making, formulation and implementation of policies.

Originality/value

CSR-related research in Southeast Asia remains an under-studied domain, and little attention has been dedicated to different dimensions of CSR and life cycle in the area of CSR-related preference for decision making.

Details

Journal of Applied Accounting Research, vol. 22 no. 4
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 20 November 2017

Liang Wang

The purpose of this paper is to theorize how the industry life cycle unfolds differently across places and how economic agglomeration varies over time.

Abstract

Purpose

The purpose of this paper is to theorize how the industry life cycle unfolds differently across places and how economic agglomeration varies over time.

Design/methodology/approach

The paper relies on literature review and conceptual analysis.

Findings

It generates a dynamic geographic concentration model (i.e. an industry’s degree of geographic concentration drops in the growth stage, rises in the mature stage, and drops again in the new growth stage) and a localized industry life-cycle model (i.e. temporal dynamics differ between the center and the periphery).

Originality/value

It makes contribution by theorizing that the extent to which an industry is geographically concentrated changes over time, and by demonstrating how an industry’s center and periphery may experience different temporal dynamics.

Details

Journal of Strategy and Management, vol. 10 no. 4
Type: Research Article
ISSN: 1755-425X

Keywords

Article
Publication date: 1 September 1991

Lisa M. Ellram

The use of a lifecycle framework is explored as a means ofdescribing the evolution of partnership relationships between industrialbuyers and sellers. Based on case…

619

Abstract

The use of a lifecycle framework is explored as a means of describing the evolution of partnership relationships between industrial buyers and sellers. Based on case studies of eight manufacturing firms, industrial buyer‐seller partnerships evolve through four stages: development, commitment, integration and dissolution. In addition to exploring a “traditional” lifecycle pattern, case studies are used to illustrate and support examples of variations on the traditional partnership lifecycle pattern. The lifecycle analogy is useful to both practitioners and theorists in developing, understanding and influencing the patterns which industrial buyer‐seller partnerships may follow.

Details

International Journal of Physical Distribution & Logistics Management, vol. 21 no. 9
Type: Research Article
ISSN: 0960-0035

Keywords

Article
Publication date: 15 July 2019

Adeel Tariq, Yuosre F. Badir, Umar Safdar, Waqas Tariq and Kamal Badar

The purpose of this paper is to investigate the relationship between firmslife cycle stages (mature vs growth) and green process innovation performance. In addition…

Abstract

Purpose

The purpose of this paper is to investigate the relationship between firmslife cycle stages (mature vs growth) and green process innovation performance. In addition, this research delineates the mechanism by which the mature stage firms are more strongly associated with green process innovation performance compared to growth stage firms and recognizes technological capabilities as a mediating variable fundamental to achieve a higher level of green process innovation performance.

Design/methodology/approach

This research collected data from 202 publicly listed Thai manufacturing firms. Initially, it used multiple regression analysis to test the relationship between mature stage firms and green process innovation performance compared to the relationship between growth stage firms and green process innovation performance. Later, this research followed Muller et al. (2005) to test the mediating role of technological capabilities and conducted (Sobel, 1982, 1986; Preacher and Hayes, 2004) tests to further validate the mediation effect.

Findings

The hypothesized relationships were found to be significant, providing a strong support that mature stage firms have higher green process innovation performance compared with growth stage firms. Moreover, the technological capabilities more strongly mediate the relationship between mature stage firms and green process innovation performance compared to growth stage firms and green process innovation performance.

Originality/value

This research contributes to the existing understanding about the internal drivers of green process innovation performance by incorporating and analyzing the firmslife cycle stages as an internal driver. This research also contributes by empirically testing the mediating role of technological capabilities on the relationship between firmslife cycle stages and green process innovation performance.

Details

Journal of Manufacturing Technology Management, vol. 31 no. 2
Type: Research Article
ISSN: 1741-038X

Keywords

Article
Publication date: 22 May 2007

Bixia Xu

The expected rate of return for individual firms is determined by multiple firm‐specific factors. There is no evidence on how firm life cycle contributes to the…

1560

Abstract

Purpose

The expected rate of return for individual firms is determined by multiple firm‐specific factors. There is no evidence on how firm life cycle contributes to the determination of the expected rate of return. This study explores how life cycle stage affects the expected rate of return.

Design/methodology/approach

Regression analysis is applied to observe the effect of life cycle. Expected rate of return is dependent variable. Life cycle measures are interacted with commonly identified risk factors. Empirical data was collected for publicly traded firms from COMPUSTAT.

Findings

The major finding of this study is the significant impact of life cycle stage. Results indicate that the value relevance of risk factors is conditional on firm life cycle stage. Findings suggest that capital markets do realize and incorporate information conveyed in firm life cycle stage when interpreting risk factors.

Research limitations/implications

Future research can explore effects of life cycle stage on share return volatility as investors trade off between return and risk.

Originality/value

This study targets a major aspect (i.e. what determine the expected rate of return in the finance literature) to shed light on the limited understanding of what contribute to individual firms’ risk premium. This study has implications for investor risk assessment and corporate risk management.

Details

Review of Accounting and Finance, vol. 6 no. 2
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 12 June 2017

Richard Hauser and John H. Thornton Jr

The purpose of this paper is to investigate an empirical solution to dividend policy relevance.

2978

Abstract

Purpose

The purpose of this paper is to investigate an empirical solution to dividend policy relevance.

Design/methodology/approach

The paper combines measures of firm maturity in a logit regression to define a comprehensive life-cycle model of the likelihood of dividend payment. The valuation of firms that conform to the model is compared to the valuation of firms that do not fit the model. Valuation is measured by the market to book (M/B) ratio.

Findings

The analysis indicates that dividend policy is related to firm value. Dividend-paying firms that fit the life-cycle model have a higher median valuation than dividend-paying firms that do not fit the life-cycle model. Similarly, non-paying firms that fit the life-cycle model have a higher median valuation than non-paying firms that do not fit the life-cycle model. The results also provide evidence that the disappearing dividend phenomenon is related to shifts in valuation.

Research limitations/implications

This paper focuses on the payment of dividends. Stock repurchases are not considered.

Practical implications

The results indicate that dividend policy is related to firm value. Approximately 15 percent of sample observations have a dividend policy counter to the life-cycle model.

Originality/value

This paper shows that the relation between a firm’s M/B ratio and dividend policy changes over the firm’s life-cycle. It also shows that the catering motive for dividends is strongest among firms that are outliers in the life-cycle model and firms of intermediate maturity.

Details

Managerial Finance, vol. 43 no. 6
Type: Research Article
ISSN: 0307-4358

Keywords

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