Firm Life Cycle and Dividend Signaling: Global Insights in A Turbulent Economic Landscape

Abstract

This study examines how changes in dividend policies align with different stages of a firm’s life cycle, specifically exploring whether these adjustments predict future profitability. The analysis focuses on non-financial companies listed in 28 countries from 2008 to 2023, a period marked by heightened uncertainty following the global financial crisis. Using [1] life cycle model, firms are categorized into five stages. The findings challenge traditional views: in the early stages, dividend cuts are often used to fund growth rather than signal distress. In the maturity stage, cuts are associated with improved profitability, contrary to the belief that they indicate financial trouble. However, during the shake-out and decline stages, changes in dividend policies provide limited predictive value. The results highlight the importance of considering a firm’s life cycle stage when interpreting dividend policy adjustments.