Firm's life cycle and cash flow classification: evidence from Indian firms

Abstract

Purpose

The study examines the influence of a firm's life cycle on the cash flow classification of Indian firms.

Design/methodology/approach

The study employs Dickinson's (2011) cash flow patterns to classify firm years under various life-cycle stages. Cash flow classification is employed to measure a firm's classification shifting (CS) practices. The study includes Indian firms listed on the Bombay Stock Exchange during 2012–2020, an ordinary least squares regression model, a fixed-effect model and a panel corrected with standard error regression method.

Findings

Firms face different opportunities and challenges at different stages of the firm's life cycle and therefore adopt cash flow CS. The results show that firms adopt cash flow CS during introduction, growth and decline stage of life cycle either to boost or to reduce operating cash flows.

Originality/value

This study is one of its kind to study the influence of a firm's life cycle on the cash flow classification of Indian firms.

Citation

Mulchandani, K., Mulchandani, K. and Jain, M. (2024), "Firm's life cycle and cash flow classification: evidence from Indian firms", Asian Review of Accounting, Vol. 32 No. 3, pp. 443-462. https://doi.org/10.1108/ARA-08-2023-0213