Do institutional investor and group, firm and time effects matter in enterprise performance in the corporate life cycle?

Abstract

Corporations undergo growth, maturity and decline, stages which form the corporate life cycle. This study discusses the influence of group, firm and time effects on enterprise performance variation at the different life cycle stages of Taiwan’s electrical and machinery industry. Results indicate that firm effect has a stronger influence than group effect, and group effect has the strongest influence at the mature stage. Thus, group effect is greatly reduced, whereas firm effect should be reduced but increased at the decline stage, a finding that is different from general perceptions. Institutional investors are important for corporations, and the response strategies of firms for institutional investors vary at different stages of the corporate life cycle. Therefore, this study also discusses the influences of institutional investors on enterprise performance variation at the firm level. Results suggest that firms implement suitable response strategies for institutional investors. Moreover, domestic general enterprise investors have positive and large impacts on enterprise performance, whereas financial institutional investors have a negative impact during the decline stage.

Keywords

• taiwan electrical and machinery industry
• general enterprise investors
• financial institutional investors
• corporate life cycle
• hierarchical linear model