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Firm age and beta: Evidence from China

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  • Liu, Hao
  • Zhang, Hao
  • Gao, Ya-Chun
  • Chen, Xu-Dong

Abstract

This paper investigates how the CAPM beta changes with firm age using a sample of A-share Chinese listed companies from the period of 1998–2015. The results show that the CAPM beta is positively associated with firm age. Our findings are fairly consistent under different beta measurements, different regression methodologies, and different subsamples. Further tests show that the positive association cannot be absorbed by the life-cycle stages variables and cannot be explained by the new listing effect. Finally, growth option creation is the most likely mechanism driving the positive relation, rather than the alternative explanations of liquidity and information opacity.

Suggested Citation

  • Liu, Hao & Zhang, Hao & Gao, Ya-Chun & Chen, Xu-Dong, 2022. "Firm age and beta: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 244-261.
    • Handle: RePEc:eee:reveco:v:77:y:2022:i:c:p:244-261
    DOI: 10.1016/j.iref.2021.10.006
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    More about this item

    Keywords

    Firm age; Growth option; CAPM Beta; Liquidity; Information opacity;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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