Firm life cycle and idiosyncratic volatility
MetadataShow full item record
This paper investigates the association between idiosyncratic volatility and firm life cycle stages. Since firm performance and availability of information vary across life cycle stages, and such variation affects uncertainty about future cash flows and stock returns, we argue that idiosyncratic volatility also varies across firm life cycle stages. Using US data, this study shows that idiosyncratic volatility is significantly higher in the introduction and decline stages, and significantly lower in the growth and mature stages, when compared to that in the shake-out stage. Our study also reveals that the roles of both cash flow volatility and information uncertainty in affecting idiosyncratic volatility vary depending on firm life cycle stages. Our results are robust to alternative specifications of life cycle proxies and idiosyncratic volatility, and to an alternative regression specification.
Showing items related by title, author, creator and subject.
Hasan, Mostafa Monzur (2015)This thesis examines the relationship between organization capital and firm life cycle, and their effect on firm risk and the cost of capital. The results show that firms with higher (lower) organization capital or cost ...
Hasan, Mostafa; Cheung, A. (2018)© 2017 We hypothesize, and examine empirically, two types of association between organization capital and firm life cycle. Are firms with high organization capital more likely to be in a particular stage of their life ...
Hasan, Mostafa; Al-Hadi, A.; Taylor, G.; Richardson, G. (2016)This study examines whether a firm’s life cycle explains its propensity to engage in corporate tax avoidance. Based on the Dickinson (2011) model of firm life cycle stages and a large dataset of US publicly listed firms ...