Effect of Firm Life Cycle Theoryon the relevance of Risk Measures

Document Type: Research Paper

Authors

1 Department of Public Management, Bojnourd Branch, Islamic Azad University, Bojnourd, Iran

2 Department of Management and Accounting, Aliabad Katoul branch, Islamic Azad University, Aliabad Katoul, Iran

Abstract

Risk phenomenon is one of the key characteristics of decision making in the fields of investment, issues associated with financial markets, and various economic activities. The present study was conducted with the aim to evaluate the impact of different periods of life cycle of companies on the relevance of risk measures of companies. In this study, the collected data have been analyzed in three stages. First, the statistical sample companies were selected using theelimination method. Then, the companies were divided to the stages of creation, growth, maturity, recovery, and decline using the Dickinson Cash Flow Pattern (2011). In the next step, the effect of risk measures was investigated in each stage and the stock return was utilized as a dependent variable. In order to test the research hypotheses, the Kolmogorov-Smirnov (K-S) test and the parametric multivariate regression method were used to check the normal distributionof data and to test the assumptions, respectively. The results of 406 year-company during the period of 2005-2015 indicated that the relevance of risk measures as well as the increasing explanatory power of risk measuresin different stages of life cycle (birth, growth, maturity, recovery, and decline) have a significant difference with each other.

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