Revisiting Firm Life Cycle Theory for New Directions in Finance
21 Pages Posted: 8 Aug 2012 Last revised: 9 Aug 2012
Date Written: July 31, 2012
In the field of finance, the arguments for and against the goal of shareholder value maximization often arise due to: (i) the lack of distinction between the short-run and the long-run corporate performance and objectives, and (ii) the exclusion of time dimension from both theory and practice of financial management. Recently, a new line of research has emerged focusing on how financial decisions evolve over time, thus highlighting the importance of understanding both historical developments and the requirements of subsequent stages of firm, industry and economic development. In this paper, I revisit firm life cycle theory and propose that it can be used as a unifying, coherent framework for adopting a wider view of the firm and its objectives. I conclude by identifying several new directions in research, teaching and practice of finance from firm life cycle perspective.
Keywords: Firm life cycle theory, new directions in finance
JEL Classification: D21, G30
Suggested Citation: Suggested Citation