Are Differences in Firm Size Transitory or Permanent?

Paul Geroski, Hossein Samiei and Giovanni Urga
Authors registered in the RePEc Author Service: Chris Walters

No 1691, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Cross-section or short-panel econometric techniques typically used to examine Gibrat’s Law of Proportionate Effect suggest that some degree of mean reversion exists, but may exaggerate the apparent randomness of corporate growth. We argue that a more natural way to explore the long-run distribution of firm sizes is to examine data on the growth of particular firms over long periods of time. Using a sample of 77 UK firms’ real total net assets data observed continually for more than 30 years, our conclusions are that growth rates are highly variable over time, but differences in growth rates between firms do not persist for very long. Further, firms show no tendency to converge to either a common size or to a pattern of stable size differences over time. These results are compared and contrasted with standard approaches using the same data, which suggest firms reach and maintain stable positions in a skewed size distribution.

Keywords: Cointegration; Convergence; Gibrat's Law; Panel Data (search for similar items in EconPapers)
JEL-codes: C22 C23 L11 (search for similar items in EconPapers)
Date: 1997-10
References: Add references at CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=1691 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Are differences in firm size transitory or permanent? (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:1691

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=1691

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().