Firm Age and Performance

52 Pages Posted: 19 Feb 2009 Last revised: 26 Aug 2012

See all articles by Claudio F. Loderer

Claudio F. Loderer

University of Berne - Institute for Financial Management; European Corporate Governance Institute (ECGI)

Urs Waelchli

Rochester-Bern Executive Programs; University of Rochester - Simon Business School

Date Written: April 30, 2010


As firms grow older, their profitability seems to decline. We first document this phenomenon and show that it is very robust. Then we offer two non-exclusive explanations of why firms may age. First, corporate aging could reflect a cementation of organizational rigidities over time. Consistent with that, costs rise, growth slows, assets become obsolete, and investment and R&D activities decline. Second, older age could advance the diffusion of rent-seeking behavior inside the firm. This hypothesis is supported by the poorer governance, larger boards, and higher CEO pay we observe in older firms. Overall, firms seem to face a real senescence problem.

Keywords: firm age, organizational rigidities, firm life cycle, corporate governance, firm performance

JEL Classification: G30, L20

Suggested Citation

Loderer, Claudio F. and Waelchli, Urs, Firm Age and Performance (April 30, 2010). Available at SSRN: or

Claudio F. Loderer (Contact Author)

University of Berne - Institute for Financial Management ( email )

Engehaldenstrasse 4
Bern, CH-3012
+41 31 631 37 75 (Phone)
+41 31 631 84 21 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels


Urs Waelchli

Rochester-Bern Executive Programs ( email )

Engehaldenstrasse 4
Bern, 3012

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

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