Stages of firm life cycle, transition, and dividend policy

Debarati Bhattacharya, Chia-Wen Chang and Wei-Hsien Li

Finance Research Letters, 2020, vol. 33, issue C

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.

Keywords: Corporate life cycle; Dividend; Payout policy (search for similar items in EconPapers)
JEL-codes: G32 G35 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:33:y:2020:i:c:s1544612318306664

DOI: 10.1016/j.frl.2019.06.024

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