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The trouble with approximating industry concentration from Compustat

Jan Keil

Journal of Corporate Finance, 2017, vol. 45, issue C, 467-479

Abstract: Using Compustat to measure industry concentration in the U.S. is problematic. Popular approximations of the Herfindahl Index based on this data set have a vanishingly low correlation with the more comprehensive Census measure. As a result, major variables of interest in corporate finance show markedly different correlations with these indicators, which can lead to a breakdown of regression results.

Keywords: Industry concentration; Herfindahl-Hirschman Index; Concentration ratios; Compustat; Economic Census (search for similar items in EconPapers)
JEL-codes: C81 G00 L11 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:corfin:v:45:y:2017:i:c:p:467-479