Stages of firm life cycle, transition, and dividend policy

Debarati Bhattacharya, Chia Wen Chang, Wei Hsien Li

Research output: Contribution to journalArticlepeer-review

29 Scopus citations

Abstract

This paper provides evidence of the ability of a cash flow-based life cycle proxy, developed by Dickinson (2011), to explain the propensity of firms to pay dividends, which can vastly improve our understanding of the life cycle effect. Our results show that the propensity to pay manifests a nonlinear relation with the five stages of a firm's life cycle, and that the commonly used life cycle proxy RE/TE cannot reconcile important features of the data. The cash flow-based proxy also captures theoretically consistent changes in payout policy when a firm transitions from one life cycle stage to another.

Original languageEnglish
Article number101226
JournalFinance Research Letters
Volume33
DOIs
StatePublished - Mar 2020

Keywords

  • Corporate life cycle
  • Dividend
  • Payout policy

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