Does Gibrat’s Law Hold? Evidence from Canadian Retail and Manufacturing Firms

Does Gibrat’s Law Hold? Evidence from Canadian Retail and Manufacturing Firms This paper investigates the validity of Gibrat’s Law holding for firms in manufacturing and retail trade sectors. The object is to expand our knowledge of Gibrat’s Law to include non-manufacturing firms. A unique longitudinal firm-level database, which contains information on Canadian incorporated establishments, enables the inter-industry comparison. The findings of the analysis are that Gibrat’s Law is violated in both manufacturing and retail sectors. Violations of Gibrat’s Law for both sectors include (i) growth rates that depend on firm size (ii) growth variability that depends on firm size and (iii) a negative persistence of firm growth. Finally, age effects or selection effects are not the causes of these violations. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Small Business Economics Springer Journals

Does Gibrat’s Law Hold? Evidence from Canadian Retail and Manufacturing Firms

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Publisher
Springer US
Copyright
Copyright © 2007 by Springer Science+Business Media, LLC
Subject
Business and Management; Management; Microeconomics; Entrepreneurship; Industrial Organization
ISSN
0921-898X
eISSN
1573-0913
D.O.I.
10.1007/s11187-006-9042-x
Publisher site
See Article on Publisher Site

Abstract

This paper investigates the validity of Gibrat’s Law holding for firms in manufacturing and retail trade sectors. The object is to expand our knowledge of Gibrat’s Law to include non-manufacturing firms. A unique longitudinal firm-level database, which contains information on Canadian incorporated establishments, enables the inter-industry comparison. The findings of the analysis are that Gibrat’s Law is violated in both manufacturing and retail sectors. Violations of Gibrat’s Law for both sectors include (i) growth rates that depend on firm size (ii) growth variability that depends on firm size and (iii) a negative persistence of firm growth. Finally, age effects or selection effects are not the causes of these violations.

Journal

Small Business EconomicsSpringer Journals

Published: Apr 17, 2007

References

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