Author Type

Graduate Student

Date of Award

2018

Document Type

Dissertation

Publication Status

Version of Record

Submission Date

October 2026

Thesis/Dissertation Advisor [Chair]

Garcia-Feijoo, Luis

Thesis/Dissertation Co-Chair

Pennathur, Anita K.

Abstract

In Essay 1, I investigate the impact of corporate life cycle dynamics on the observed negative association between asset growth and stock returns in the crosssection. I find that the asset growth effect on average exists across some life cycle stages measured using cohorts. However, controlling for certain variables associated with the theoretical explanations, I find there is no relation between asset growth and returns. I argue this evidence is consistent with an agency-based explanation of the asset growth effect. Furthermore, a decomposition of the drivers of the effect shows that different components of assets (i.e. working capital and financing) drive asset growth effect at different life cycle stages. From a decomposition analyses, results show that in the youngest firms (cohort 1), asset growth effect is mostly driven by both operating liability and stock financing on one side (financing) and noncash current assets, PPE, and growth in other assets (for working capital) while cohort 3’s drivers appear to be stock issuances, together with noncash current assets, which I conclude offer further support for agency issues. In Essay 2, I examine how firms’ life cycle affect insider trading behavior, profits surrounding trades, price informativeness, and financing constraints. I argue that if firms’ policies and characteristics change over time as shown in lifecycle literature, then from firm characteristics that motivate insider-trading behavior, one should observe some differences across varying life cycle stages measured using age cohorts. I find that insiders are net sellers at all life cycle stages of a firm. Furthermore, insiders tend to trade more in younger firms than in older firms even though they have fewer numbers of insiders trading. Trading characteristics are generally statistically significant across cohorts. Overall, insiders appear to predict the correct direction for positive wealth generation when trading. Specifically, at all lifecycle stages, they appear to sell before negative CARs, and buy during periods associated with negative CARs that lead to positive CARs days after insider transactions. The findings on price informativeness suggest that in general insider purchases enhance price informativeness for firms at different lifecycle stages, however, this finding holds only for cohort 4 (oldest firms) in the case of insider sales. The implication of this finding is that regulation should be more lax towards purchases as compared to sales for firms, except for sales in firms that are older. Lastly, insider trades are linked with positive investment-cash flow sensitivities for both insider purchases and insider sales, which generally increase monotonically across cohorts. This finding is robust to using GMM approach.

Extent

204 p.

Comments

Includes bibliography.|Dissertation (Ph.D.)--Florida Atlantic University, 2018.|FAU Electronic Theses and Dissertations Collection|Includes bibliography.

Identifier

FA00013057

Format

pdf

Download

Share

COinS