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Life cycle and capital structure : = Some empirical evidence.

Record Type:	Language materials, manuscript : Monograph/item
Title/Author:	Life cycle and capital structure :/
Reminder of title:	Some empirical evidence.
Author:	Wokukwu, Kingsley Chiedozie.
Description:	1 online resource (95 pages)
Notes:	Source: Dissertations Abstracts International, Volume: 62-03, Section: A.
Contained By:	Dissertations Abstracts International62-03A.
Subject:	Finance. -
Online resource:	click for full text (PQDT)
ISBN:	9780599767898

Life cycle and capital structure : = Some empirical evidence.
Wokukwu, Kingsley Chiedozie.

Life cycle and capital structure :Some empirical evidence. - 1 online resource (95 pages)

Source: Dissertations Abstracts International, Volume: 62-03, Section: A.

Thesis (D.B.A.)--Nova Southeastern University, 2000.

Includes bibliographical references

This study investigated if firms in the Computer and Peripheral industry make capital structure decisions based on where they are positioned at the life cycle. Firms like products or human beings have life cycles. In both cases, the process of growth begins with birth or pioneering, growth, maturity, to decline. For every firm or products like a typewriter that looks invincible in the marketplace have begun to feel the quake in the marketplace due to shrinking life cycle, innovations, and rapidly changes in technology. Shrinking product life cycles has saddled firms with obsolete products, and declining profits had been seen as a warning that a permanent downturn always lurks threatening around the comer. The need to change, adapt to technological changes has become business buzz words and product development, and continuous improvements have become corporate strategy. Chapter one addresses the problems facing firms in the wake of shrinking product life cycles on firms, and the users of the products. One the interesting issues uncovered in chapter one is that because of the shrinking life cycle, consumers are facing the need of replacing property and equipment at a faster rate than before because newer products perform better, more computing power, faster and more users' friendly. On the other hand, rapidly changing technology do not allow manufacturers ample time to perfect production before the products become obsolete. Chapter two surveys literature on a capital structure and life cycle. Chapter two reveals that life cycle is the foundation of corporate grand strategy, financial decision making, and marketing strategies. Financial characteristics peculiar to firms at different stages of a life cycle and the empirical evidence on capital structure were explored. Hypothesis was developed in chapter three, statistical method used was identified, models were developed and sample size noted. Data were obtained from a COMPUSTAT data file and Robust Regression was used to analyze the data. Sampled were grouped into four stages of growth using a-five-year growth rates of sales. The statistical results support the hypothesis that the optimum ROI as the function of debt/equity ratio is not the same but differs at different stages of life cycles. The traditional corporate finance models suggest that firm select optimal capital structures by trading off various tax incentive benefits of debt financing against financial distress. While there is support for these models in the empirical literature, existing evidence from this study also suggests that firm's life cycle plays important role in determining its capital structure. For example firms at the growth phase of the life cycle which are highly profitable often use earnings to reduce their debt obligations and as a result, they are usually less levered than firms at other stages of life cycle.

Electronic reproduction.
Ann Arbor, Mich. :
ProQuest,
2024

Mode of access: World Wide Web

ISBN: 9780599767898Subjects--Topical Terms:

559073
Finance.
Subjects--Index Terms:

Capital structureIndex Terms--Genre/Form:

554714
Electronic books.

Life cycle and capital structure : = Some empirical evidence.
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520 $a This study investigated if firms in the Computer and Peripheral industry make capital structure decisions based on where they are positioned at the life cycle. Firms like products or human beings have life cycles. In both cases, the process of growth begins with birth or pioneering, growth, maturity, to decline. For every firm or products like a typewriter that looks invincible in the marketplace have begun to feel the quake in the marketplace due to shrinking life cycle, innovations, and rapidly changes in technology. Shrinking product life cycles has saddled firms with obsolete products, and declining profits had been seen as a warning that a permanent downturn always lurks threatening around the comer. The need to change, adapt to technological changes has become business buzz words and product development, and continuous improvements have become corporate strategy. Chapter one addresses the problems facing firms in the wake of shrinking product life cycles on firms, and the users of the products. One the interesting issues uncovered in chapter one is that because of the shrinking life cycle, consumers are facing the need of replacing property and equipment at a faster rate than before because newer products perform better, more computing power, faster and more users' friendly. On the other hand, rapidly changing technology do not allow manufacturers ample time to perfect production before the products become obsolete. Chapter two surveys literature on a capital structure and life cycle. Chapter two reveals that life cycle is the foundation of corporate grand strategy, financial decision making, and marketing strategies. Financial characteristics peculiar to firms at different stages of a life cycle and the empirical evidence on capital structure were explored. Hypothesis was developed in chapter three, statistical method used was identified, models were developed and sample size noted. Data were obtained from a COMPUSTAT data file and Robust Regression was used to analyze the data. Sampled were grouped into four stages of growth using a-five-year growth rates of sales. The statistical results support the hypothesis that the optimum ROI as the function of debt/equity ratio is not the same but differs at different stages of life cycles. The traditional corporate finance models suggest that firm select optimal capital structures by trading off various tax incentive benefits of debt financing against financial distress. While there is support for these models in the empirical literature, existing evidence from this study also suggests that firm's life cycle plays important role in determining its capital structure. For example firms at the growth phase of the life cycle which are highly profitable often use earnings to reduce their debt obligations and as a result, they are usually less levered than firms at other stages of life cycle.
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