 The Relationship between Implied Cost of Equity and Corporate Life Cycle StagesAttaullah Shah () and
Khyber Khan
IMSciences Working Papers from Institute of Management Sciences, Peshawar, Pakistan Abstract: In this study, we develop and test a hypothesis that the implied cost of equity declines as a firm passes through the growth, maturity, and stagnant stages of its life. We use the methodology of Anthony and Ramesh (1992) for identifying corporate life cycle stages. Three different models are used to calculate the implied cost of equity: the Easton (2004) model, the Gordon and Gordon (1997) model, and the Ohlson and Juettner-Nauroth (2005) model. For testing our hypothesis, we use data of all non-financial firms listed on the Karachi Stock Exchange from 1996 to 2012. The results lend strong support to our hypothesis in both the univariate and multiple regression analysis. The results show robustness to using different models of implied cost of equity and controlling for well-known determinants of the cost of equity such as beta, idiosyncratic risk, market-to-book ratio, firm size, and leverage. Keywords: Corporate Life Cycle; Implied Cost of Equity; MPEG; Gordon; Ohlson and Juettner-Nauroth; Pakistan. (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bec:papers:2017-01 Access Statistics for this paper More papers in IMSciences Working Papers from Institute of Management Sciences, Peshawar, Pakistan Institute of Management Sciences 1-A, Sector E-5, Phase VII, Hayatabad, Peshawar- Pakistan. Contact information at EDIRC. |
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