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Persistence in Corporate Performance? Empirical Evidence from Panel Unit Root Tests

Author

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  • Jan Bentzen

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  • Erik Madsen
  • Valdemar Smith
  • Mogens Dilling-Hansen

Abstract

Persistence in corporate performance is analyzed in the framework of empirical tests of unit root behavior concerning firm profits. Data for firm-specific rates of return is applied in a set of panel unit root tests to address the question of persistence in profits both at firm level and for the aggregate level of industry-specific profits. The firm data all reject a null hypothesis of random walk behavior of profits but when smoothing profit rates at a two-digit NACE-code level for industries, the empirical evidence is more mixed as most industries show up with a unit root in aggregate rates of return, i.e. indicating persistence in corporate performance.
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Suggested Citation

  • Jan Bentzen & Erik Madsen & Valdemar Smith & Mogens Dilling-Hansen, 2005. "Persistence in Corporate Performance? Empirical Evidence from Panel Unit Root Tests," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 32(2), pages 217-230, June.
  • Handle: RePEc:kap:empiri:v:32:y:2005:i:2:p:217-230
    DOI: 10.1007/s10663-004-6728-7
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Canarella, Giorgio & Miller, Stephen M. & Nourayi, Mahmoud M., 2013. "Firm profitability: Mean-reverting or random-walk behavior?," Journal of Economics and Business, Elsevier, vol. 66(C), pages 76-97.
    2. Alper Aslan & Kemal Koksal & Oguz Ocal, 2011. "Competitive Environment Hypothesis in Turkish Banking System," International Journal of Economics and Financial Issues, Econjournals, vol. 1(2), pages 74-77, June.
    3. Wiberg, Daniel, 2009. "Persistence of Profits and the Systematic Search for Knowledge - R&D and profits above the norm," Working Paper Series in Economics and Institutions of Innovation 161, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.

    More about this item

    Keywords

    Corporate performance; persistence in profits; panel unit root tests; C3; L2;

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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