What Information Matters to Investors at Different Stages of a Firm's Life Cycle?

Dickinson, Victoria; Kassa, Haim; Schaberl, Philipp D.

doi:10.2139/ssrn.3215389

Cited by 11 publications

(16 citation statements)

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“…For example, Hribar and Yehuda (2015) show that firm life cycle affects the behavior of accruals and has implications for the accrual anomaly. Other studies show that firm life cycle affects the value-relevance of accounting measures, as well as their relative importance in an investor's information set (Anthony and Ramesh 1992;Dickinson, Kassa, and Schaberl 2018), or show that life cycle information can be used to analyze and predict a firm's financial performance (Dickinson 2011;Cantrell and Dickinson 2018;Vorst and Yohn 2018). Overall, these studies show the importance of firm life cycle as a determinant of firm decision making, a firm's earnings-generating process, and the information attributes relevant to investors.…”

Section: Firm Life Cyclementioning

confidence: 91%

“…Building on studies in the organization literature that show that firm decisions and decisionmaking processes vary predictably across organizational life cycle stages, recent accounting studies document the importance of life cycle information for forecasting and valuation (Dickinson, 2011;Cantrell and Dickinson 2018;Vorst and Yohn 2018). In addition, studies show that the value-relevance of accounting measures and the behavior of accruals vary as a function of organizational life cycle (Anthony and Ramesh 1992;Dickinson, Kassa, and Schaberl 2018;Hribar and Yehuda, 2015). Other studies use firm life cycle to explain various other (financial) decisions such as dividend policies (DeAngelo et al 2006;Grullon et al 2002), corporate acquisitions (Owen and Yawson 2010), and diversification (Arikan and Stulz 2016), or have documented the importance of life cycle (peers) in a compensation setting (Drake and Martin 2015;.…”

Section: Introductionmentioning

confidence: 99%

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Intra-Life Cycle Information Transfers

Lyle¹,

Vorst

Yohn

2019

SSRN Journal

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We investigate the presence of a shared life cycle component in earnings and test whether the earnings of one firm are relevant for valuing other firms in the same life cycle stage. We find that firm-pairs in the same life cycle stage have greater accounting comparability and greater comovement in their returns, operating performance, and investments than firm-pairs consisting of firms in different life cycle stages. We further document economically significant transfers of information from announcing firms to non-announcing life cycle peers around an announcing firm's earnings announcement. The magnitudes are comparable to that of intra-industry information transfers and do not depend on whether the life cycle peers are also active in the same industry. In contrast, we find that intra-industry information transfers are smaller for industry peers in different life cycle stages. Information transfers are stronger for life cycle peers that have greater (transient) institutional cross-holdings, suggesting that institutional trading is an important mechanism by which life cycle information spills over. Overall, this study provides insight into the factors that shape a firm's earnings generation process and investors' use of such factors. Furthermore, this study complements prior literature on firm life cycle by providing additional evidence on the importance of life cycle in the valuation process."Skilled analysts must view companies from a perspective that identifies where they stand in their life cycle, realizing that companies refusing to 'act their age' can destroy value." (Aswath Damodaran) I.

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Section: Firm Life Cyclementioning

confidence: 91%

Section: Introductionmentioning

confidence: 99%

Intra-Life Cycle Information Transfers

Lyle¹,

Vorst

Yohn

2019

SSRN Journal

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“…Previous literature has provided evidence on the importance of firm and industry life cycle in an accounting setting (Cantrell and Dickinson 2019;Dickinson 2011). For example, Anthony and Ramesh (1992) and Dickinson et al (2018) show that firm life cycle has an impact on the valuerelevance of accounting constructs, while Hribar and Yehuda (2015) show that the role of accruals, whether they capture investments in future growth or adjust for the timing of cash flows, is different depending on the life cycle stage of the firm. As such, firm and industry life cycle are both fundamental drivers of accounting measures.…”

Section: Cross-sectional Variationmentioning

confidence: 99%

“…Hribar and Yehuda (2015) show that the relative role of accruals, i.e., timing adjustment for cash flows or investment in firm growth, varies with life cycle stage. Firm life cycle also explains variation in the value-relevance of reported accounting measures, such as sales growth, capital investment, earnings and book values, as well as analysts' earnings forecasts (Anthony and Ramesh 1992;Dickinson et al 2018). Additionally, recent accounting studies show that life cycle is relevant in analyzing, predicting and valuing a firm's financial performance (Cantrell and Dickinson 2019;Dickinson 2011;Vorst and Yohn 2018).…”

Section: Firm Life Cycle and Earnings Persistencementioning

confidence: 99%

“…46 Recent studies show that accounting measures vary in a predictable way by firm life cycle, which shows that next to industry, organizational life cycle is an important determinant of firm performance. For example, the value-relevance of reported accounting measures and the behavior of accruals have been shown to vary predictably by life cycle stage (Anthony and Ramesh 1992;Dickinson et al 2018;Hribar and Yehuda 2015). Other studies have documented the relevance of life cycle fundamentals for forecasting and valuation (Cantrell and Dickinson 2019;Dickinson 2011;Vorst and Yohn 2018;Vorst and Yohn 2019).…”

Section: Introductionmentioning

confidence: 99%

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Earnings properties

Smeets¹

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People interested in the research are advised to contact the author for the final version of the publication, or visit the DOI to the publisher's website. • The final author version and the galley proof are versions of the publication after peer review. • The final published version features the final layout of the paper including the volume, issue and page numbers. Link to publication General rights Copyright and moral rights for the publications made accessible in the public portal are retained by the authors and/or other copyright owners and it is a condition of accessing publications that users recognise and abide by the legal requirements associated with these rights. • Users may download and print one copy of any publication from the public portal for the purpose of private study or research. • You may not further distribute the material or use it for any profit-making activity or commercial gain • You may freely distribute the URL identifying the publication in the public portal. If the publication is distributed under the terms of Article 25fa of the Dutch Copyright Act, indicated by the "Taverne" license above, please follow below link for the End User Agreement:

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The mediating mechanism of earnings management on the relationship between life cycle and financial reporting quality: Finding from MRA and fsQCA

Khương

Anh

2022

Bus Strat Dev

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The study examined the relationship between organization life cycle (OLC) and financial reporting quality (FRQ) in the Vietnamese context with the mediating role of earnings management (EM). We used estimation OLS, fixed effects model, and other robustness tests to validate the results on a sample of 408 Vietnamese listed companies over the period 2010–2017. In addition, we compare the regression results with a recently established approach is, fuzzy‐set qualitative comparative analysis (fsQCA). The multiple regression analysis results suggest that firms with low profits or poor financial performance have low‐quality financial statements. On the other hand, when firms mature or have significant retained earnings, the quality of financial information improves and peaks. Besides, throughout the OLC, real earnings management behaviors are less likely to be used than accruals earnings management. Finally, because of the mediating effect of EM, the influence of OLC on FRQ is increased. The fsQCA findings indicate complex configurations between OLC, EM and other controls factors to the outcome of FRQ. This research contributes empirical evidence to the scientific literature on accounting and corporate governance. Next, the main contribution of our study is the examination of mediating role of EM on OLC‐FRQ association through both regression analysis and the fsQCA approach. Additionally, we conducted this study in Vietnam, where the legal framework in protecting the investors is still not complete; this will significantly contribute to the literature overview of OLC and FRQ.

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What Information Matters to Investors at Different Stages of a Firm's Life Cycle?

Cited by 11 publications

References 0 publications

Intra-Life Cycle Information Transfers

Intra-Life Cycle Information Transfers

Earnings properties

The mediating mechanism of earnings management on the relationship between life cycle and financial reporting quality: Finding from MRA and fsQCA

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