Relationship of Company Ageand Industry Sector with Financial Performance–An Indian Evidence
Keywords:
Corporategovernance,Age,Industrysector,financial performanceAbstract
The purpose of this paper is to analyze the relationship of the age of companies and the industry sector on financial performance variables for NIFTY100 Index compa nies. The minimum age of a company in NIFTY100 index was seven years and the maximum age is 114 years.Further, these companies have been divided into nine industry sectors. To analyze the relationship sixteen financial performance variables have been taken for the financialyear2019. It has been found that older companies have better performance in terms of return ratios,stakeholders- related ratios,leverage,replacementratios.Younger companies have better operational efficiency and market valuation. It has also been observed that the reisasignificant difference in return ratios for Telecom and Utility,Financial, Industrial,Consumer staples,IT,Energy andConsumer Discretionary Sectors. The finding soft his paper will enable investors in making prudent investment decisions and will enable them to understand how the age and industry of a company impact the financial performance of companies in India.
References
• Acharya, Viral V. and Gottschalg, Oliver and Hahn, Moritz and Kehoe, Conor, Corporate GovernanceandValueCreation:EvidencefromPrivateEquity(February17,2010).EuropeanCorporateGov ernance Institute (ECGI) - Finance Working Paper No. 232/2009, Available atSSRN:https://ssrn.com/abstract=1324016orhttp://dx.doi.org/10.2139/ssrn.1324016
• Akben-Selcuk, E. (2016). Does Firm Age Affect Profitability? Evidence from Turkey. InternationalJournalofEconomicSciences,3,1-9.
• Akhavein, J.D., Berger, A.N. and Humphrey, D.B. (1997), ―The effects of megamergers on efficiencyand prices: evidence from a bank profit function‖, Review of Industrial Organization, Vol. 12 No. 1,pp.95-139.
• Akinyomi, O. J. &Olagunju, A. (2013). Effect of firm size on profitability: Evidence from Nigerianmanufacturingsector.PrimeJournalsofBusinessAdministrationandManagement,3(9),1171- 1175.
• Basti, E., Bayyurt, N. & Akın, A. (2011). A comparative performance analysis of foreign and domesticmanufacturing companies in Turkey. European Journal of Economic and Political Science, 4(2), 125-137.
• Bianco, M., Bontempi, M.E., Golinelli, R. &Parigi, G. (2013). Family firms’ investments,
uncertaintyandopacity.SmallBusinessEconomics,40(4),1035–1058.
• Booth,L.,Aivazian,V.,Demirguc‐ Kunt,A.andMaksimovic,V.(2001),―Capitalstructuresindevelopingco untries‖, The JournalofFinance,Vol. 56No.1, pp.87-130.
• Coad, A., Segarra-Blascoand, A. &Teruel, M. (2013). Like milk or wine: does firm performanceimprovewithage?.StructuralChangeandEconomicDynamics,24,173-189.
• Dogan, M. (2013). Does firm size affect the firm profitability? Evidence from Turkey. ResearchJournalofFinanceandAccounting, 4(4),53-59.
• Esteve-Pérez, Silviano, Fabio Pieri, and Diego Rodriguez. 2018. Age and Productivity as DeterminantsofFirmSurvivalover theIndustryLifeCycle.Industryand Innovation25:167–98.
• Ghafoorifard, M., Sheykh, B., Shakibaee, M. &Joshaghan, N.S. (2014). Assessing the relationshipbetween firm size, age and financial performance in listed companies on Tehran Stock Exchange.InternationalJournal ofScientificManagementand Development,2(11), 631-635.
• Gilchris, M. (2013), ―Influence of bank specific and macroeconomic factors on the profitability of 25commercial banks in Pakistan during the time period 2007-2011‖, American Journal of Business andFinance,Vol.3No.2.
• Gurbuz, A.O., Aybars, A. &Kutlu, O. (2010). Corporate governance and financial performance with aperspectiveoninstitutionalownership:empiricalevidencefromTurkey.JournalofAppliedManagement AccountingResearch,8(2),21-37.
•Hande,Karadag.2017.TheImpactofIndustry,FirmAgeandEducationLevelonFinancialManagement Performance in Small and Medium-Sized Enterprises (SMEs): Evidence from Turkey.JournalofEntrepreneurshipin EmergingEconomies9: 300–314.
• Kipesha, E.F. (2013). Impact of size and age on firm performance: Evidences from MicrofinanceInstitutionsinTanzania,ResearchJournalofFinanceandAccounting,4(5),105-116.
• Kogan, L. and Tian, M. (2012), ―Firm characteristics and empirical factor models: a data-
miningexperiment‖, InternationalFinanceDiscussionPapersNo. 1070.
• Kücher, Alexander, Stefan Mayr, Christine Mitter, Christine Duller, and Birgit FeldbauerDurstmüller.2018. Firm Age Dynamics and Causes of Corporate Bankruptcy: Age Dependent Explanations forBusinessFailure.Review ofManagerial Science,0123456789.
•Lahiri,Somnath,andSaptarshiPurkayastha.2017.ImpactofIndustrySectoronCorporateDiversification and Firm Performance: Evidence from Indian Business Groups. Canadian Journal ofAdministrativeSciences/Revue CanadienneDesSciencesde l’Administration 34:77–88.
• Legesse, Guta. 2018. An Analysis of the Effects of Aging and Experience on Firms’ PerformanceBT—Economic Growth and Development in Ethiopia. Edited by Almas Heshmati and Haeyeon Yoon.Singapore:Springer,pp.255–76.
• Li, Yao Amber, Wei Liao, and Chen Carol Zhao. 2018. Credit Constraints and Firm Productivity:MicroeconomicEvidencefromChina. ResearchinInternationalBusinessandFinance45:134– 49.
• Liargovas, P. and Skandalis, K. (2008), ―Factors affecting firms’ financial performance: the case ofGreece‖,WorkingPapersNo.0012,DepartmentofEconomics,UniversityofPeloponnese.
• Loderer, C.F. &Waelchli, U. (2010). Firm age and performance, SSRN working paper. RetrievedMarch01,2018(deindirildi)fromtheWorldWideWeb:https://papers.ssrn.com/sol3/papers.cfm? abstract_id=1342248.
• Lopez–Gracia, J. & Sanchez–Andujar, S. (2007). Financial structure of the family business: evidencefromagroupofsmallSpanishfirms. FamilyBusiness Review.20, 269-287.
• Lwango, Albert, RégisCoeurderoy, and Gabriel A. Giménez Roche. 2017. Family Influence and SMEPerformanceunderConditionsofFirm Sizeand Age.Journalof SmallBusinessand EnterpriseDevelopment24:629–48.
• Majumdar, Sumit K. 1997. The Impact of Size and Age on Firm-Level Performance: Some EvidencefromIndia.Reviewof IndustrialOrganization12:231–41.
• Marsh, P. (1982), ―The choice between equity and debt: an empirical study‖, The Journal of
Finance,Vol.37No.1,pp.121-144.
• McKnight, P.J. and Weir, C. (2008), ―Agency costs, corporate governance mechanisms and ownershipstructure in large UK publicly quoted companies: a panel data analysis‖, The Quarterly Review ofEconomics and Finance, Vol. 49No. 2, pp.139-158.
• Omondi, M. M &Muturi, W. (2013). Factors affecting the financial performance of listed companies attheNairobiSecuritiesExchangeinKenya.ResearchJournalofFinanceandAccounting,4(15),99-104
• Osunsan O.K., Nowak J., Mabonga E., Pule S., Kibirige A.R. &Baliruno J.B. (2015). Firm age andperformance in Kampala, Uganda: A selection of small business enterprises. International Journal ofAcademicResearchinBusinessandSocial Sciences,5(4), 364-374.
• Owolabi, S. A. &Alu, C. N. (2012). Effective Working Capital Management and Profitability: A Studyof Selected Quoted Manufacturing Companies in Nigeria. Economics and Finance Review, 2(6), 55–67.
• Owolabi,S.A.&Inyang,U.E.(2013).Internationalpragmaticreviewandassessmentofcapitalstructure determinants. Kuwait Chapter of Arabian Journal of Business and Management Review, 2(6),82-96.
• Prajogo,DanielI.2006.TheRelationshipbetweenInnovationandBusinessPerformance—AComparative Study between Manufacturing and Service Firms. Knowledge and Process Management13: 218–25.
• Rajan, R.G. and Zingales, L. (1995), ―What do we know about capital structure? Some evidence frominternationaldata‖,TheJournal ofFinance, Vol.50 No.5,pp.1421-1460.
• ReedD(2002)Corporategovernancereformsindevelopingcountries.JBusEthics37(3):223–247
• Reed, Richard, and Susan F Storrud-Barnes. 2009. Systematic Performance Differences across theManufacturing-ServiceContinuum.ServiceBusiness3:319.
• Richard,P.J.,Devinney,T.M.,Yip,G.S.andJohnson,G.(2009),―Measuringorganizationalperformance:
towards methodological best practice‖, Journal of Management, Vol. 35 No. 3, pp. 718-804.
• Seo, Yong Won, Youn Sung Kim, DaeSoo Kim, Yung-Mok Yu, and Sung Hee Lee. 2016. InnovationPatternsofManufacturingandServiceFirmsinKorea.TotalQualityManagement&BusinessExce llence27: 718–34.
• Smirlock, M. (1985), ―Evidence on the (non) relationship between concentration and profitability inbanking‖,Journal ofMoney,CreditandBanking,Vol.17No. 1,pp. 69-83.S
• Subrahmanyam, A. and Titman, S. (2001), ―Feedback from stock prices to cash flows‖, Jou rnal ofFinance,Vol.56No.18, pp.2389-2413.
• Wald, J.K. (1999), ―How firm characteristics affect capital structure: an international comparison‖,JournalofFinancial Research,Vol. 22 No. 2,pp.161-187.
• Walker,D.(2001),―Exploringthehumancapitalcontributiontoproductivity,profitabilityandthemarketevalu ationof thefirm‖, availableat:wwwlib.umi.com/dissertationsWorld BankGroup(2015),―Kenya economic update‖, available at: www- wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2015/10/14/090224b08314473e/1_0
/Rendered/PDF/Kenya0economic0public0participation.pdf(accessed15,June2015).
Downloads
Published
How to Cite
Issue
Section
License
You are free to:
- Share — copy and redistribute the material in any medium or format for any purpose, even commercially.
- Adapt — remix, transform, and build upon the material for any purpose, even commercially.
- The licensor cannot revoke these freedoms as long as you follow the license terms.
Under the following terms:
- Attribution — You must give appropriate credit , provide a link to the license, and indicate if changes were made . You may do so in any reasonable manner, but not in any way that suggests the licensor endorses you or your use.
- No additional restrictions — You may not apply legal terms or technological measures that legally restrict others from doing anything the license permits.
Notices:
You do not have to comply with the license for elements of the material in the public domain or where your use is permitted by an applicable exception or limitation .
No warranties are given. The license may not give you all of the permissions necessary for your intended use. For example, other rights such as publicity, privacy, or moral rights may limit how you use the material.
