Firm Life Cycle And Stock Price Crash Risk

Firm life cycle reflects the development of a firm driven by the changes of observable and unobservable factors,and affects the business decision-making and sustainability of profitability as well.According to the theory of firm life cycle,a company will go through the stages of start-up,growth,maturity,shakeout and decline.Different stages of life cycle represent the evolution path of a company under the influence of internal factors(such as strategic choice,management ability)and external factors(such as competitive environment and macro-economy).China’s capital market started relatively late.In the process of vigorous development,it is inevitable that market bubbles and financial crisis will break out.During past twenty years,the global and regional financial crisis and the huge losses caused by have stimulated people’s more interest in exploring the factors affecting financial risks,the results of the impact and the solutions.With the development of the capital market,more and more companies have chosen the way of listing in order to expand and seek a more rapid development.As of 2019,there are 5,392 global listed Chinese companies(excluding the stock to system),and 3,760 Chinese A share listed companies,with a total market value of 59 trillion and 200 billion RMB.As these thousands of listed companies are in different industries,operating conditions and development strategies,it is a feasible and targeted method to conduct research on these listed companies through different stages of the company’s life cycle.This paper links the two important concepts of the firm life cycle and the risk of stock price crash,aiming to explore the relationship between these two concepts.Through the empirical research,it is found that the listed companies in the start-up stage have the highest risk of stock price crash,but the listed companies in the growth period.maturity period and recession period have no significant difference in the risk of stock price crash compared with the listed companies in the maturity period.Through the grouping research,we found that this relationship is more significant for the listed companies that obtain more value from future growth opportunities and the start-up and growth listed companies with good performance.In addition,through further research.this paper found that investor sentiment has a certain regulatory effect on the relationship between the life cycle and the risk of stock price crash,and the company’s diversified operation strategy will also have an impact on the relationship between the company’s life cycle and the risk of stock price crash.For listed companies at the startup stage,diversified operation will intensify their stock price crash risk.