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The origin of collective phenomena in firm sizes

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  • Ji, Guseon
  • Dai, Bingcun
  • Park, Sung-Pil
  • Ahn, Kwangwon

Abstract

This study explains the emergence and changes of collective phenomena observed in firm size distribution, in particular scale-invariant power law behavior, by applying the notion of corporate bankruptcy. We present a model which predicts that corporate failure rate is positively related to the scaling exponent, and the extent of information disparity is negatively associated to the scaling exponent. We test our model prediction with the US corporate bankruptcy data, and find that the outcomes of large-firm shocks could have a stronger impact when the information environment is worse.

Suggested Citation

  • Ji, Guseon & Dai, Bingcun & Park, Sung-Pil & Ahn, Kwangwon, 2020. "The origin of collective phenomena in firm sizes," Chaos, Solitons & Fractals, Elsevier, vol. 136(C).
    • Handle: RePEc:eee:chsofr:v:136:y:2020:i:c:s0960077920302186
    DOI: 10.1016/j.chaos.2020.109818
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