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Journal of Accounting & Taxation

September 2016 Vol 1(2), pp. 025-037

Copyright 2016 Unified Journals

Original Research Article

Effect of the Theory of Life Cycle on Size of Firms in Nigeria Brewery Industry

Dr. Inyiama Oliver Ikechukwu* and Nwankwo Caroline Nkechinyere

Department of Accountancy, Enugu State University of Science and Technology, Enugu State, Nigeria

Corresponding Author's Email: inyiamaik@yahoo.com

Accepted 14th June, 2016.


Abstract


The study aims at examining the effect as well the magnitude and nature of relationship between firm size and firm age in Nigeria brewery industry from 2004 to 2014. Ordinary least squares method in the form of multiple regression was applied in the analysis, while stationarity test was conducted using the Augmented Dickey- Fuller (ADF) and Phillip Perrons (PP) tests. The outcome of the analysis reveals that firm size is significantly and positively affected by firm age. This implies that as firm increases in age, especially in the capital intensive brewery industry, the firms tend to grow in asset size to meet up with increasing demand for their brands and to also remain competitive. There is no causality running from either FMSIZE to FMAGE or from FMAGE to FMSIZE, both at 1 year and 2 years lagged periods. The implication is that Firm Age does not granger cause Firm Size and vice versa. A positive correlation between firm size and firm age was also indicated from the analysis. This implies that firm size and firm age change/increase in the same direction in the sector. The import of these findings is that in line with life cycle theory, firms in technology driven brewery sector tend to grow in asset base from their growth stage through the maturity stage and when they mature, tend to slow down the growth of their asset base as they concentrate more on giving shareholders returns on their investment.

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Cite This Article

Dr. Inyiama Oliver Ikechukwu and Nwankwo Caroline Nkechinyere. Effect of the Theory of Life Cycle on Size of Firms in Nigeria Brewery Industry 1(2) 2016 pp. 025-037.




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