Author

  • Hamed Omrani

    • University of Tehran, Iran
    • Iran, Islamic Republic of

  • KeramatOllah Heydari Rostami

    • University of Tehran, Iran
    • Iran, Islamic Republic of

  • Saber Samadi

    • University of Tehran, Iran
    • Iran, Islamic Republic of

  • Ahmad Kazemi Margavi

    • University of Tehran, Iran
    • Iran, Islamic Republic of

  • Hamid Asadzadeh

    • University of Tehran, Iran
    • Iran, Islamic Republic of

  • Hemad Nazari

    • University of Tehran Azad Oloom VA Tahghighat, Iran
    • Iran, Islamic Republic of

Abstract

The major aim of this paper is to compare the explanatory power of risk measures versus performance measures in different life-cycle stages. To test the hypotheses, first, sample firms were classified into three life-cycle stages (Growth, Mature and Decline). Then, using regression models and Vuong's Z-statistic, the hypotheses were investigated. In this study, financial information of 75 firms which were accepted at Tehran’s Stock Exchange (TSE) from 2003 to 2008 (450 firm-years) was examined. The results of this study show that in growth and decline stages, the explanatory power of risk measures is significantly higher than performance measures and in mature stage, the opposite is true.

Keywords

References

  • Adizes, I. (1989). Corporate life cycle: How and why corporations grow and Die and what do about it, Englewood Cliffs, NJ
  • Anthony, J. H. & Ramesh, K. (1992). Association between accounting performance measures and stock prices a test of the life cycle hypothesis. Journal of Accounting and Economics , 15, 203-227.
  • Banz, R. W. (1981). The relationship between return and market value of common stocks. Journal of Financial Economics , 9, 3-18.
  • Baribeau, M. B. (1989). Leverage risk in the nonfinancial corporate sector. Business Economics , 24, 34-39.
  • Black, E. L. (1998). Life cycle affects the incremental value-relevance of earnings and cash flow measures. Journal of Financial Statement Analysis , 4(1), 40-56.
  • Brown, P., Kleidon, A. & Marsh, T. (1983). New evidence on the nature of size-related anomalies in stock prices. Journal of Financial Economics , 12, 33-56.
  • Fama, F. & French, K. (1992). The cross sections of expected stock returns. Journal of Finance , 47(2), 42765.
  • Feltham, G. & Ohlson, J. (1995). Valuation and Clean Surplus Accounting for Operating and Financial Activities. Contemporary Accounting Research, 689-731.
  • Financial Accounting Standards Board. (1978). Statement of Financial Accounting Concepts No. 1: Objectives of Financial Reporting by Business Enterprises, Stamford, CT.
  • Jenkins, D. S., Kane, G. D. & Velury, U. (2004). The impact of the corporate life cycle on the value-relevance of disaggregated earnings components. Review of Accounting and Finance , 3, 5-20.
  • Keim, D. (1983). Size-related anomalies and stock return seasonality: empirical evidence. Journal of Financial Economics , 12, 13-32.
  • Martinez, I. (2003). The impact of firm specific attributes on the value relevance in earnings and cash flows: a nonlinear relationship between stock returns and accounting numbers. Review of Accounting and Finance , 2, 16-39.
  • Mueller, D. C. (1972). A Life Cycle Theory of the Firm. Journal of Industrial Economics, 20(3), 199-219.
  • Mueller, D. C. (1975). Life Cycle Effects on Corporate Returns on Retentions. The re view of Economics and Statistics , 57(4), 400-409.
  • Myers, S. C. (1977). Determinants of Corporate Borrowing. Journal of Financial Economics, 5, 147-175.
  • Ohlson, J. (1995). Earnings, book values, and dividends in security valuation. Contemporary Accounting Research , 11, 661-87.
  • Ou J. & Penman, S. (1989). Financial Statement Analysis and the Prediction of Return. Journal of Accounting & Economics, 11, 299 – 305.
  • Park, Y. & Chen, K. (2006). The Effect of Accounting Conservatism and Life-Cycle Stages on Firm Valuation. Journal of Applied Business Research , 22, 75-92.
  • Rappaport, A. (1981). Selecting strategies that create shareholder value. Harvard Business Review, MayJune, 139-49.
  • Richardson, R. P. & Gordon, J. R. (1980). Measuring total manufacturing performance, Sloan Management Review, 47-58
  • Roll, R. (1977). A critique of the asset pricing theory’s tests; part I: on past and potential testability of testability of theory. Journal of Financial Economics , 4, 129-76.
  • Ross, S. A. (1976). The arbitrage theory of asset pricing. Journal of Economic Theory , 13, 341-60.
  • Shi, C. (2003). On the trade-off between the future benefits and riskiness of R&D: a bondholders’ perspective. Journal of Accounting and Economics , 35, 227-54.
  • Sugianis, T. (1996). The value Relevancy of Research Development on valuation of future Earnings. Journal of Accounting and Economics, 21, 128-142-54.
  • Vuong, Q. (1989). Likelihood Ratio Test for Model Selection and Non-Nested Hypothesis. Econometrica, 57, 307-333.
  • Xu, B. (2007). Life cycle effect on the value Relevance of common risk factor. Review of Accounting and Finance, 6, 162-175.

Downloads

No downloads have been recorded for this article yet. Figures appear here once readers begin downloading the full text.

How to Cite

Omrani, H., Rostami, K. H., Samadi, S., Margavi, A. K., Asadzadeh, H., & Nazari, H. (2011). Corporate Life Cycle and the Explanatory Power of Risk Measures versus Performance Measures. Journal of Education and Vocational Research, 2(6), 199-206. https://doi.org/10.22610/jevr.v2i6.40

Share this article

License

Copyright (c) 2011 Hamed Omrani, KeramatOllah Heydari Rostami, Saber Samadi, Ahmad Kazemi Margavi, Hamid Asadzadeh, Hemad Nazari (Author)

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of revised paper in the light of suggestions of the reviewers, the editorial team  edits and formats manuscripts to bring uniformity and standardization in published material.

This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.

Keywords

Section

Research Paper

Published in

Vol. 2 No. 6 (2011) Corporate Identity, Learning & Data-Driven Insight View issue contents

Published

2011-12-15

Submissions

Have research to publish? Journal of Education and Vocational Research welcomes submissions.

Make a Submission