Do Corporate Policies Follow a Life-Cycle?
42 Pages Posted: 26 May 2015 Last revised: 19 Apr 2016
Date Written: April 16, 2016
We examine whether corporate investment, financing, and cash policies are interdependent and follow a predictable pattern in line with the firm life-cycle. We find that investments and equity issuance decrease with firm life-cycle, while debt issuance and cash holdings increase in the introduction and growth stages and decrease in the mature and shake-out/decline stages of the firm’s life-cycle. These results are robust after using various proxies for life-cycle and controlling for firm, CEO and board level characteristics. Collectively, our results show that corporate policies follow a firm life-cycle.
Keywords: Life-cycle theory; Investment decisions; Financing decisions; Cash policy; Payout policy
JEL Classification: G30, G31, G32, G35
Suggested Citation: Suggested Citation