Corporate Growth and Profitability

Paul A Geroski, Stephen Machin and Hossein Samiei

No 1431, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper argues that current-period corporate growth rates reflect changes in current expectations about the long-run profitability of a firm. Using data on a balanced panel of 271 large, quoted UK firms over the period 1976?82, we report the existence of a positive, statistically significant and robust correlation between current-period growth rates and a natural measure of changes in current expectations about long-run profitability, namely changes in the stock market valuation of the firm.

Keywords: Corporate growth; Gibrats law; Panel data (search for similar items in EconPapers)
JEL-codes: L1 L2 (search for similar items in EconPapers)
Date: 1996-07
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