Life cycle stages and corporate decisions

Abstract

Purpose: This article aims to examine the influence of life cycle stages on the corporate decisions of Brazilian firms. Originality/value: The study contributes by presenting a scenario of investment, financing, dividend, and cash decisions, revealing patterns and characteristics of the evolution of Brazilian firms throughout their life cycle stages. For this, we tested an alternative life cycle proxy capable of classifying firms in different stages, even shake-out and decline, not defined by the model of Dickinson (2011), and applied a more robust methodology (GMM-SYS) considering potential endogeneity problems disregarded by previous studies. Design/methodology/approach: The sample consists of 203 traded firms listed on B3 from 2010 to 2018. We collected the data from the Thomson Reuters Eikon database. We estimated the parameters of the models by GMM-SYS (Generalized Method of Moments) to mitigate problems of endogeneity, omitted variables, and heterogeneity. Findings: As our main results, we have that Brazilian firms do not follow a pattern and oscillate between stages and that there is strong evidence of the effect of the life cycle on corporate decisions. In the introduction and growth stages, firms invest more, have more debt, pay fewer dividends, and have greater cash availability. In the mature stage, investments, debts, and the level of cash are lower. In the shake-out stage, no results were significant, requiring further studies to better explore this stage in developing countries, such as Brazil.