Exploring the relationship between financial ratios and created shareholders value: A life cycle perspective

Abstract

The aim of this research is to discover relationship between financial ratios and created shareholders value, at the different life cycle stages. Therefore, we select dividend pay-out, sale growth, capital expenditure, and firm age as the life cycle descriptors, which are suggested by Anthony and Ramesh (1992) (our sample firms were gathered from the Tehran Stock Exchange over the period 2005 to 2011), thus to identify firms according three life cycle stages, namely growth, maturity and decline, and investigated the impact of corporate life cycle on relationship between financial ratios and created shareholder value. For testing the hypotheses pooled least squares model was used. The results showed that although there is meaningful relation between financial ratios and created shareholders value, but corporate life cycle of different stages can affect the relationship between financial ratios and created shareholder value.