Firm Age and Performance
نویسندگان
چکیده
This paper investigates how firm age affects performance. Consistent with an obsolescence of firm endowments, the existence of organizational rigidities, and the proliferation of seniority rules, performance gets worse with age. Profits fall, margins thin, sales growth drops, and costs rise. Firms do best when they are young, and roughly 15 years after listing (37 years after incorporation), they start underperforming the median firm in the industry. This relation cannot be explained away by sample selection, manager age, industry age, time-varying risk, corporate governance, and ownership structure. Stock returns, however, are unaffected. Overall, corporate geriatrics problems are real.
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