Effect of Firm Life Cycle Theory on the relevance of Risk Measures

Risk phenomenon is one of the key characteristics of decision making in the fields of investment, issues associated with financial markets, and various economic activities. The present study was an attempt to evaluate the impact of different periods of life cycle of companies on the relevance of risk measures of companies. In this study, the collected data have been analyzed in three stages. First, the statistical sample companies were selected using the elimination method. Then, the companies were divided into the stages of creation, growth, maturity, recovery, and decline using the Dickinson Cash Flow Pattern [1]. In the next step, the effect of risk measures was investigated in each stage and the stock return was utilized as a dependent variable. In order to test the research hypotheses, the Kolmogorov-Smirnov (K-S) test and the parametric multivariate regression method were used to check the normal distribution of data and to test the assumptions, respectively. The results of 406 year-company during the period of 2005-2015 indicated that the relevance of risk measures as well as the increasing explanatory power of risk measures in different stages of life cycle (birth, growth, maturity, recovery, and decline) have a significant difference with each other.