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The trouble with approximating industry concentration from Compustat

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  • Keil, Jan

Abstract

Using Compustat to measure industry concentration in the U.S. is problematic. Popular approximations of the Herfindahl Index based on this data set have a vanishingly low correlation with the more comprehensive Census measure. As a result, major variables of interest in corporate finance show markedly different correlations with these indicators, which can lead to a breakdown of regression results.

Suggested Citation

  • Keil, Jan, 2017. "The trouble with approximating industry concentration from Compustat," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 467-479.
    • Handle: RePEc:eee:corfin:v:45:y:2017:i:c:p:467-479
    DOI: 10.1016/j.jcorpfin.2017.05.019
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    More about this item

    Keywords

    Industry concentration; Herfindahl-Hirschman Index; Concentration ratios; Compustat; Economic Census;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • G00 - Financial Economics - - General - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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