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The persistence of accounting versus economic profit

Author

Listed:
  • Matthew J. Holian

    (San Jose State University)

  • Ali M. Reza

    (San Jose State University & Rouen Business School)

Abstract

Drawing on Schumpeterian theory, this article presents estimates of a first-order autoregressive model of profit persistence for large US firms, using Economic Value Added (EVA), the popular measure of profits produced by Stern Stewart and Company, and simple (unadjusted) accounting measures from the Compustat database. We hypothesize about the differences we should expect to find between these two sets of estimates, and also provide a fresh normative assessment of the dynamic competitiveness of the US economy.

Suggested Citation

  • Matthew J. Holian & Ali M. Reza, 2010. "The persistence of accounting versus economic profit," Economics Bulletin, AccessEcon, vol. 30(3), pages 2189-2196.
    • Handle: RePEc:ebl:ecbull:eb-10-00118
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I3-P201.pdf
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    References listed on IDEAS

    as
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    3. Villalonga, Belen, 2004. "Intangible resources, Tobin's q, and sustainability of performance differences," Journal of Economic Behavior & Organization, Elsevier, vol. 54(2), pages 205-230, June.
    4. John Cable & Richard Jackson, 2008. "The Persistence of Profits in the Long Run: A New Approach," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 15(2), pages 229-244.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    dynamic competition efficiency persistence;

    JEL classification:

    • L0 - Industrial Organization - - General
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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