Firm Life Cycle and Disclosure Quality

• In Event: Effects of Disclosures

Abstract

We examine the relation between firms' life cycle stages and disclosure quality. We measure life cycle stages following Dickinson (2011), who recently redefined firm life cycle in terms of firms' operating, investing, and financing cash flows. We find that disclosure quality is significantly different across firm life cycle stages. Specifically, firms in the introduction, growth, and mature life cycle stages have higher disclosure quality than firms in other life cycle stages. We also observe significant differences in disclosure quality within life cycle stages based on firms' profitability and size. Our study contributes to the financial disclosure literature by documenting firms' life cycle stage as a significant determinant of disclosure quality.

Authors

• Lauren A. Cooper, West Virginia University

• Trevor Sorensen, West Virginia University

• Chen Zhao, West Virginia University