The Influence of Suboptimal Investments on Company Value in Emerging Countries Depending on Life Cycle Stages

Suboptimal investments destructively influence the firm value in accordance with the agency theory. Since the preferences of agency conflicts’ participants vary along the firm development, the extent of suboptimal investments may differ in the stages of the life-cycle. This research is focused on the estimation of suboptimal investments and assessment of their impact on the firm value in different life cycle stages. The improved methodology of suboptimal investments estimation was tested with the sample of companies from emerging countries in the period 2006-2015. According to the received results, companies overinvest more in maturity and decline stages, than in the growth stage, stage that leads to corresponding firm value decrease. Underinvestment is harder and more destroying for the firm value in growth and decline stages, than in the maturity. In the decline stage underinvestment leads to higher decrease of the enterprise value, than overinvestment.