Life Cycle Effect on the Value Relevance of Risk Measures and Performance Measures

Document Type : Original Article


1 Assistant Professor, Faculty of Management, Tehran University

2 M. A. Accounting , Faculty of Management, Tehran University


The main goal of this paper is to investigatelife cycle effect on the value relevance of risk measures and performance measures. To test the research hypotheses, first, sample firms were classified into three life-cycle stages (Growth, Mature and Decline). Then, using regression models and Vuong's Z-statistic the hypotheses were tested. In this study, the financial data of 74 firms which are listed in Tehran’s Stock Exchange (TSE) for the period of 2001 to 2007 (518 firm-years) are tested. The results show that in different life cycle stages the value relevance of risk measures and performance measures and the incremental explanatory power of risk measures have significant difference. Moreover, the results of Vuong's Z-statistic show that in growth stage the incremental explanatory power of risk measures is significantly higher than other stages, and in mature stage the opposite is true.


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