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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

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

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Article
Publication date: 3 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

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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

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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…

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.

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

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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…

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

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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.

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

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Article
Publication date: 12 November 2018

Feng Jui Hsu

The purpose of this paper is to assess US-based firms from 2005 to 2015 to determine whether firms with better corporate social responsibility (CSR) performance will…

Abstract

Purpose

The purpose of this paper is to assess US-based firms from 2005 to 2015 to determine whether firms with better corporate social responsibility (CSR) performance will allocate capital through their life-cycle to better maintain or extend total assets.

Design/methodology/approach

Kinder, Lydenberg, Domini Research & Analytics social performance rating scores were used to measure CSR performance in an initial sample of 19,707 firm-year observations. Firms are first classified into stages including introduction, growth, maturity, and decline, and use multiclass linear discriminant analysis, the Dickinson classification scheme (Dickinson, 2011), and the ratio of retained earnings to total assets (RETA) as life-cycle proxies. Life-cycle was formulated based on a broad set of accounting data sourced from Compustat. Various corporate characteristics from the CRSP database were used to classify all sample firms into five equal groups based on their CSR performance.

Findings

A firm’s equity and debt issuance assume a hump shape over the life-cycle under CSR practice, and higher-CSR firms face fewer significant issues as they mature; payout, RETA, and free cash flow decreased from high-CSR performance firms to low-CSR performance firms; and cash holdings also exhibit a hump shape over the life-cycle and higher-CSR practices are associated with significantly lower cash holdings.

Originality/value

CSR performance is a useful predictor for forecasting firm life-cycle and superior CSR performance ensures efficient capital allocation throughout firm life-cycle. Furthermore, CSR practice is an indicator of firm life-cycle sustainability and indicates a firm’s future cash flow patterns.

Details

Management Decision, vol. 56 no. 11
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 2 February 2015

Thomas O'Connor and Julie Byrne

– The purpose of this paper is to examine whether corporate governance changes along the corporate life-cycle.

Abstract

Purpose

The purpose of this paper is to examine whether corporate governance changes along the corporate life-cycle.

Design/methodology/approach

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.

Findings

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.

Research limitations/implications

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.

Originality/value

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).

Details

International Journal of Managerial Finance, vol. 11 no. 1
Type: Research Article
ISSN: 1743-9132

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Article
Publication date: 1 April 2004

David S. Jenkins, Gregory D. Kane and Uma Velury

We investigate the relative roles of key components of earnings change in explaining the value relevance of earnings across different lifecycle stages of the firm. We…

Abstract

We investigate the relative roles of key components of earnings change in explaining the value relevance of earnings across different lifecycle stages of the firm. We hypothesize that firms in different lifecycle stages take different strategic actions: change in sales is emphasized in the growth and mature stages, while in later stages, profitability is emphasized. Because payoffs to such strategies vary across the lifecycle, the stock market reaction to the success firms have in employing these strategic actions is likely to vary across the lifecycle. To test our hypotheses, we disaggregate changes in earnings into three key components: earnings change from change in sales, earnings change from change in profitability, and an interaction term comprising both sales change and profitability change. Our findings are consistent with our hypotheses: when firms are in the growth stage, the value‐relevance of change in sales is relatively greater than that of change in profitability. In the mature stage, the value relevance of change in profitability increases, relative to that of change in sales. When firms are in stagnant stage, the value‐relevance of changes in profitability are relatively greater than that of change in sales. Collectively, the results demonstrate a shift in the value relevance of earnings components from a growth emphasis early in the lifecycle to a profitability emphasis later in the lifecycle.

Details

Review of Accounting and Finance, vol. 3 no. 4
Type: Research Article
ISSN: 1475-7702

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