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Firm Valuation Over Lifecycle: A Perspective on Growth Option
Author(s) -
Liu Hao,
Li Qiang,
Zeng Yong
Publication year - 2018
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12236
Subject(s) - valuation (finance) , business , industrial organization , valuation effects , economics , finance
This paper investigates the roles of the dynamic of growth options in determining possible change trends of firm valuation over a firm's lifecycle. The theoretical results show that the gradual exercising of endowed growth options will cause a downward trend of firm valuation over lifecycle, while the creating of new growth options can mitigate the downward trend. In particular, there may be an upward trend of firm valuation for firms able to continually create growth options over time. The evidence on 2354 Chinese listed firms during the period of 1998–2015 supports theoretical predictions well.