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Does Firm Life Cycle Impact Corporate Investment Efficiency?

Author

Listed:
  • Bilal Ahmed

    (School of Management, Zhejiang University of Technology, Hangzhou 310000, China)

  • Minhas Akbar

    (Department of Management Sciences, COMSATS University Islamabad (Sahiwal Campus), Sahiwal 5700, Pakistan)

  • Tanazza Sabahat

    (Department of Management Sciences, COMSATS University Islamabad (Sahiwal Campus), Sahiwal 5700, Pakistan)

  • Saqib Ali

    (Department of Management Sciences, COMSATS University Islamabad (Sahiwal Campus), Sahiwal 5700, Pakistan)

  • Ammar Hussain

    (Department of Management Sciences, COMSATS University Islamabad (Sahiwal Campus), Sahiwal 5700, Pakistan)

  • Ahsan Akbar

    (International Business School, Guangzhou College of South China University of Technology, Guangzhou 510080, China)

  • Xie Hongming

    (School of Management, Zhejiang University of Technology, Hangzhou 310000, China
    School of Management, Guangzhou University, Guangzhou 510000, China)

Abstract

Corporate investment efficiency (CIE) is an imperative factor influencing the smooth functioning and financial sustainability of an enterprise. The role of a firm life cycle on risk and performance fundamentals has been extensively explored in the literature. However, it remains unclear as to whether the life cycle stages of a firm have any impact on corporate investment efficiency. This paper investigates the role of firm life cycle stages (FLCS) in determining the investment efficiency of 351 Pakistani non-financial listed firms over the course of 12 years (2005–2016). It used panel data fixed effects and ordinary least squares (OLS) techniques to empirically examine the proposed relationship. By employing Dickinson’s FLCS measure, we found that CIE was lower during the introduction and decline stages and higher at the growth and maturity stages of a firm’s life cycle. Moreover, the results of regression analysis revealed that mature firms enjoyed the highest level of investment efficiency followed by the growth firms. Overall, CIE exhibited an inverted U-shaped trend across FLCS. In addition, the findings corroborated the idea that the sample firms could not sustain their investment efficiency when they moved along different stages of the life cycle. Thus, policymakers are suggested to customize their investment policies for each stage of FLC to attain sustainable financial performance throughout the life of a firm.

Suggested Citation

  • Bilal Ahmed & Minhas Akbar & Tanazza Sabahat & Saqib Ali & Ammar Hussain & Ahsan Akbar & Xie Hongming, 2020. "Does Firm Life Cycle Impact Corporate Investment Efficiency?," Sustainability, MDPI, vol. 13(1), pages 1-13, December.
    • Handle: RePEc:gam:jsusta:v:13:y:2020:i:1:p:197-:d:469298
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