Investment, dividend, debt decisions and business life cycle

This study aims to examine whether a company will adopt different investment, dividend and debt decisions at different life cycle stages. First, based on the combinations of five variables including revenue growth rate, dividend payment rate, capital expenditure rate, return on assets, and company age, this study applies the two-stage clustering analysis to analyze the financial data of 195 public electronic companies in Taiwan from 1997 to 2006 and partitions the entire business life cycle into four different stages. Second, using the three-stage least squares method (3SLS), the result reveals that the interrelationship between investment, dividend and debt decisions at different life cycle stages has significant difference in Taiwan market. It can also be inferred that these financial decisions are not mutually independent; hence the Taiwan capital market is not perfect.