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On the distributional properties of size, profit and growth of Icelandic firms

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Author Info

  • Einar Jón Erlingsson

    ()
    (Reykjavik University)

  • Simone Alfarano

    ()
    (Universitat Jaume I)

  • Marco Raberto

    ()
    (DOGE.I, Università di Genova)

  • Hlynur Stefánssonn

    ()
    (Reykjavik University)

Abstract

In this paper, we analyze the distributional properties of the balance sheets of Icelandic firms by performing an empirical analysis of total assets, profit rates and growth rates using a data set of 2818 Icelandic firms during the period 2000-2009. We find that the firms size measure, i.e. total assets, have the same heavy tail characteristics as various studies have shown, e.g. for U.S. and Italian firms. The heavy tail nature of the total assets distribution seems to be robust w.r.t. a boom-bust cycle of the economy as well as special characteristics of Icelandic firms, e.g. their relatively small size and private ownership. Another important finding is that the profit rates, or return on assets, of Icelandic firms follow a Laplace like distribution similar to U.S. firms. Additionally, we identified deviations from the distributional regularities, namely the power law behavior of firms' size and Laplacian distributions of growth and profit rates, during the booming period of the economy 2005-2007.

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Bibliographic Info

Paper provided by Economics Department, Universitat Jaume I, Castellón (Spain) in its series Working Papers with number 2012/01.

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Length: 15 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:jau:wpaper:2012/01

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Keywords: Firm size; Profit rates; Growth rates; Power law; Laplace distribution; Icelandic Firms;

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  1. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  2. Cirillo, Pasquale & Hüsler, Jürg, 2009. "On the upper tail of Italian firms’ size distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(8), pages 1546-1554.
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  4. Cirillo, Pasquale, 2010. "An analysis of the size distribution of Italian firms by age," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(3), pages 459-466.
  5. Cincotti, Silvano & Raberto, Marco & Teglio, Andrea, 2010. "Credit money and macroeconomic instability in the agent-based model and simulator Eurace," Economics Discussion Papers 2010-4, Kiel Institute for the World Economy.
  6. M. Goldstein & S. Morris & G. Yen, 2004. "Problems with fitting to the power-law distribution," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 41(2), pages 255-258, 09.
  7. Gatti, Domenico Delli & Guilmi, Corrado Di & Gaffeo, Edoardo & Giulioni, Gianfranco & Gallegati, Mauro & Palestrini, Antonio, 2005. "A new approach to business fluctuations: heterogeneous interacting agents, scaling laws and financial fragility," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 489-512, April.
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  12. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
  13. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  14. Alfarano, Simone & Milakovic, Mishael, 2008. "Does classical competition explain the statistical features of firm growth?," Economics Letters, Elsevier, vol. 101(3), pages 272-274, December.
  15. Wagner, Friedrich & Milaković, Mishael & Alfarano, Simone, 2010. "Firm profitability and the network of organizational capabilities," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(21), pages 4769-4775.
  16. Irle, Albrecht & Milaković, Mishael & Alfarano, Simone & Kauschke, Jonas, 2008. "A Statistical Equilibrium Model of Competitive Firms," Economics Working Papers 2008,10, Christian-Albrechts-University of Kiel, Department of Economics.
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Cited by:
  1. Alfarano, Simone & Förster, Niels & Milaković, Mishael & Mundt, Philipp, 2013. "The real versus the financial economy: A global tale of stability versus volatility," Economics Discussion Papers 2013-8, Kiel Institute for the World Economy.
  2. Metzig, Cornelia & Gordon, Mirta B., 2014. "A model for scaling in firms’ size and growth rate distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 398(C), pages 264-279.

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