Please use this identifier to cite or link to this item: http://hdl.handle.net/1893/25019
Appears in Collections:Economics Journal Articles
Peer Review Status: Refereed
Title: Do firm sizes and profit rates converge? Evidence on Gibrat's Law and the persistence of profits in the long run
Authors: Goddard, John
McMillan, David
Wilson, John O S
Contact Email: david.mcmillan@stir.ac.uk
Issue Date: 2006
Citation: Goddard J, McMillan D & Wilson JOS (2006) Do firm sizes and profit rates converge? Evidence on Gibrat's Law and the persistence of profits in the long run, Applied Economics, 38 (3), pp. 267-278.
Abstract: Three panel unit root tests are applied to a 31-year firm size, growth and profit rate data set for 96 large, quoted UK firms. All tests reject the unit root null for log size if the Augmented Dickey Fuller autoregressions exclude a linear time trend. If a linear trend is included, the results are more ambiguous and appear to differ systematically between tests. The view that firm growth is either random or near-random does not receive unequivocal support in all tests. There is however strong and consistent evidence of mean-reversion in profit rates.
DOI Link: http://dx.doi.org/10.1080/00036840500367955
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