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Do corporate policies follow a life-cycle?

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  • Faff, Robert
  • Kwok, Wing Chun
  • Podolski, Edward J.
  • Wong, George

Abstract

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.

Suggested Citation

  • Faff, Robert & Kwok, Wing Chun & Podolski, Edward J. & Wong, George, 2016. "Do corporate policies follow a life-cycle?," Journal of Banking & Finance, Elsevier, vol. 69(C), pages 95-107.
    • Handle: RePEc:eee:jbfina:v:69:y:2016:i:c:p:95-107
    DOI: 10.1016/j.jbankfin.2016.04.009
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    More about this item

    Keywords

    Life-cycle theory; Investment decisions; Financing decisions; Cash policy;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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