[Home ] [Archive]   [ فارسی ]  
:: Main :: About :: Current Issue :: Archive :: Search :: Submit :: Contact ::
:: Volume 1, Number 2 (3-2017) ::
aapc 2017, 1(2): 215-239 Back to browse issues page
The Relationship between Firm Life Cycle and Stock Price Crash Risk with an Emphasis on Information Asymmetry and Behavioral Approach
Ghodratollah Talebnia, Vahid Taghizadeh , Nesa Heshmat
ph.D student Department of Accounting, Tabriz branch, Islamic Azad University, Tabriz, Iran
Abstract:   (474 Views)

Firm life cycle reflects a firm’s evolvement arising from changes in organization's internal and external factors. Recently, the rate of business change has increased dramatically, suggesting a bigger role for life cycle in the valuation process.  At the same time, the recent financial crisis and the resulting losses that were incurred, have spurred additional interest in understanding the determinants of crash risk. The purpose of this study was to investigate the relationship between firm life cycle and stock price crash risk of companies listed on the Tehran Stock Exchange. The number 120 was chosen for the period 2007-2013. Combined data were used to test the hypotheses of the model. In order to evaluate the company life cycle, Dickinson (2011) pattern was used. According to this model, companies are divided to five stages: introduction, growth, Mature, Shake-Out and decline. The results show that crash risk is highest in the introduction and growth stage of the life cycle.  While a significant relationship there no observed between other life cycle stages and stock price crash risk. The results showed that under conditions of high information asymmetry, stock price crash risk is more for the companies in the introduction and growth..

Keywords: Firm Life Cycle, Stock Price Crash Risk, Bad News, Information Asymmetry.
Full-Text [PDF 242 kb]   (320 Downloads)    
Type of Study: Research | Subject: Special
Received: 2017/02/16 | Accepted: 2017/03/10 | Published: 2017/03/19
1. Andreou, P.C, Antoniou, C., Horton, J., Louca, C. (2013). Corporate Governance and Firm-Specific Stock Price Crashes. SSRN Working paper.
2. Anthony, J.H., and K. Ramesh. (1992). Association between accounting performance measures and stock prices: a test of the life cycle hypothesis. Journal of Accounting and Economics 15 (2-3): 203-227.
3. Barclay, M., and C. Smith, Jr. (2005). The capital structure puzzle: The evidence revisited. Journal of Applied Corporate Finance 17 (1): 8–17.
4. Black, E.L. (1998). Life-cycle impacts on the incremental value-relevance of earnings and cash flow measures. Journal of Financial Statement Analysis 4 (1): 40-56.
5. Bleck, A., and X. Liu. (2007). Market transparency and the accounting regime. Journal of Accounting Research 45 (2): 229-256.
6. Callen, J.L., Fang, X. (2015). Short interest and stock price crash risk, Journal of Banking & Finance 60, (November ): 181–194.
7. Chen, J., H. Hong, and J.C. Stein. (2001). Forecasting crashes: trading volume, past returns, and conditional skewness in returns. Journal of Financial Economics 61 (3): 345-381.
8. DeAngelo, H., L. DeAngelo, and R.M. Stulz. (2006). Dividend policy and the earned/contributed capital mix: a test of the life-cycle theory. Journal of Financial Economics 81 (2): 227-254.
9. Dickinson, V. (2011). Cash flow patterns as a proxy for firm life cycle. The Accounting Review 86 (6): 1969-1994.
10. Hamers, L., Renders, A., Vorst, P. (2016). Firm Life Cycle and Stock Price Crash Risk, http://dx.doi.org/10.2139/ssrn.2711170.
11. Hasan, M. M., Hossain, M., Cheung, A., Habib, A. (2015). Corporate life cycle and cost of equity capital. Journal of Contemporary Accounting & Economics 11 (1): 46–60.
12. Hong, H., and J.C. Stein. (2003). Differences of opinion, short-sales constraints, and market crashes. The Review of Financial Studies 16 (2): 487-525.
13. Hribar, P., and N. Yehuda. (2015). The mispricing of cash flows and accruals at different life-cycle stages. Contemporary Accounting Research 32 (3): 1053-1072.
14. Hutton, A.P., A.J. Marcus, and H. Tehranian. (2009). Opaque financial reports, R2, and crash risk. Journal of Financial Economics 94 (1): 67-86.
15. Jawahar, I.M., and G.L. McLaughlin. (2001). Toward a descriptive stakeholder theory: an organizational life cycle approach. The Academy of Management Review 26 (3): 397-414.
16. Jensen, M. (1986). The agency costs of free cash flows, corporate finance, and takeovers. American Economic Review 76 (2): 323–329.
17. Jin, L., and S.C. Myers. (2006). R2 around the world: new theory and new tests. Journal of Financial Economics 79 (2): 257-292.
18. Joseph, K., & Wintoki, M.B. )2013(. Advertising investments, information asymmetry, and insider gains. Journal of Empirical Finance 22 (1): 1-15.
19. Jovanovic, B. (1982). Selection and the evolution of industry. Econometrica 50 (3): 649–670.
20. Kim, J.-B., Y. Li, and L. Zhang. (2011a). Corporate tax avoidance and stock price crash risk: firm-level analysis. Journal of Financial Economics 100 (3): 639-662.
21. Kim, J.-B., Zhang, L. (2015). Accounting conservatism and stock price crash risk: firm-level evidence. Contemporary Accounting Research, forthcoming.
22. Kothari, S.P., S. Shu, and P.D. Wysocki. (2009). Do managers withhold bad news? Journal of Accounting Research 47 (1): 241-276.
23. Lev, B., and P. Zarowin. (1999). The boundaries of financial reporting and how to extend them. Journal of Accounting Research 37 (2): 353-385.
24. Myers, S.C. (1977). Determinants of corporate borrowing. Journal of Financial Economics 5: 147-175
25. Robin A. J., Zhang, H. (2015). Do Industry-Specialist Auditors Influence Stock Price Crash Risk?. AUDITING: A Journal of Practice & Theory, 34 (3): 47-79.
26. Spence, M. (1981). The learning curve and competition. Bell Journal of Economics 12 (1): 49–70.
27. Thanatawee, Y. (2011). Life-cycle theory and free cash flow hypothesis: Evidence from dividend policy in Thailand. International Journal of Financial Research 2 (2): 52-60
28. Wernerfelt, B. 1985. The dynamics of prices and market shares over the product life cycle. Management Science 31 (8): 928–939.
Send email to the article author

Add your comments about this article
Your username or email:

Write the security code in the box >

DOI: 10.18869/acadpub.aapc.1.2.215

XML   Persian Abstract   Print

Download citation:
BibTeX | RIS | EndNote | Medlars | ProCite | Reference Manager | RefWorks
Send citation to:

Talebnia G, Taghizadeh V, Heshmat N. The Relationship between Firm Life Cycle and Stock Price Crash Risk with an Emphasis on Information Asymmetry and Behavioral Approach. aapc. 2017; 1 (2) :215-239
URL: http://aapc.khu.ac.ir/article-1-148-en.html
Volume 1, Number 2 (3-2017) Back to browse issues page
فصلنامه دستاوردهای حسابداری ارزشی و رفتاری Valued and Behavioral Accountings Achievements
Persian site map - English site map - Created in 0.14 seconds with 838 queries by yektaweb 3426