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On the distributional properties of size, pro fit and growth of Icelandic firms

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  • Erlingsson, Einar Jón
  • Alfarano, Simone
  • Raberto, Marco
  • Stefánsson, Hlynur

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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35857.

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Date of creation: Jan 2012
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Handle: RePEc:pra:mprapa:35857

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

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  1. 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.
  2. de Wit, Gerrit, 2005. "Firm size distributions: An overview of steady-state distributions resulting from firm dynamics models," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 423-450, June.
  3. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  4. Ijiri, Yuji & Simon, Herbert A, 1974. "Interpretations of Departures from the Pareto Curve Firm-Size Distributions," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 315-31, Part I, M.
  5. Raberto, Marco & Teglio, Andrea & Cincotti, Silvano, 2012. "Debt, deleveraging and business cycles: An agent-based perspective," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 6(27), pages 1-49.
  6. Alfarano, Simone & Milaković, Mishael, 2008. "Does Classical Competition Explain the Statistical Features of Firm Growth?," Economics Working Papers 2008,03, Christian-Albrechts-University of Kiel, Department of Economics.
  7. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
  8. 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.
  9. Xavier Gabaix, 2009. "Power Laws in Economics and Finance," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 255-294, 05.
  10. Giulio Bottazzi & Angelo Secchi, 2006. "Explaining the distribution of firm growth rates," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 235-256, 06.
  11. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
  12. 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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