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The Devil Dwells in the Tails A Quantile Regression Approach to Firm Growth

Toke Reichstein (), Michael Dahl, Bernd Ebersberger, and Morten Jensen

No 06-34, DRUID Working Papers from DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies

Abstract: This paper explores the firm growth rate distribution in a Gibrat’s Law context. The aim is to provide an empirical exploration of the determinants of firm growth. The work is novel in two respects. First, rather than limiting the analysis to focus on the conditional mean growth level, we investigate the complete shape of the distribution. Second, we show that the differences in the firm growth rate process between large and small firms are highly circumstantial. That industry dynamics have a substantial influence on the relationship between firm size and firm growth. The data used includes more than 9000 Danish firms from manufacturing, services and construction. We provide robust evidence indicating that firm growth studies should be less obsessed with explaining means and instead look to other parts of the firm growth rate distribution.

Keywords: Firm growth; quantile regression; distribution shape (search for similar items in EconPapers)
JEL-codes: C14 L11 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-ent
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