CORPORATE LIFE CYCLE METHODS IN EMERGING MARKETS: EVIDENCE FROM TURKEY

Year 2017, Volume: 4 Issue: 3, 224 - 236, 30.09.2017

Omer Faruk Gulec Semra Karacaer

https://doi.org/10.17261/Pressacademia.2017.690

Abstract

Purpose - This paper focuses on the
corporate life cycle concept which is one of the vital theories to analyze the
firms more homogeneously. The aim of this study is to elaborate main life cycle
classification procedures and to compare the most cited methodologies regarding
financial indicators according to the expectations from the stages.

Methodology - We review
the literature and especially examine three firm life cycle methods; Anthony
and Ramesh (1992), Yonpae and Chen (2006) and Dickinson (2011). We also develop
five hypotheses that are related to firm size, profitability, stock returns,
liquidity and risk of the firms for three different stages through using
descriptive statistics and t test.

Findings -  According to the results, while growth firms
have higher risk, mature firms are more profitable and get higher stock
returns. On the other hand, decline firms are bigger and more liquid than the
other stages. The findings also suggest that Anthony and Ramesh (1992) life
cycle classification procedure provides a little better insight than the other
methods.

Conclusion - The study
defines the firm life cycle notion which is an expanded version of product life
cycle through explaining the most common classification procedures. Investors
should concentrate on firms that are at growth stage since they have more
potential to receive profitable projects. However, mature firms are at the peak
point of the profitability and the risk is relatively low. Firms at the decline
stage are one of the biggest candidates of stagnation and the capacity cannot
be fully utilized.

Keywords

Corporate life cycle, accounting performance, financial ratios, life cycle stages

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