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

Listed author(s):
  • Einar Jón Erlingsson

    ()

    (Reykjavik University)

  • Simone Alfarano

    ()

    (Universitat Jaume I)

  • Marco Raberto

    ()

    (DOGE.I, Università di Genova)

  • Hlynur Stefánssonn

    ()

    (Reykjavik University)

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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File URL: http://www.doctreballeco.uji.es/wpficheros/erlingssonetal2012.pdf
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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
Handle: RePEc:jau:wpaper:2012/01
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  1. 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 (IfW), vol. 6, pages 1-49.
  2. Gerrit de Wit, 2004. "Firm Size Distributions : An overview of steady-state distributions resulting from firm dynamics models," Scales Research Reports N200418, EIM Business and Policy Research.
  3. 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 (IfW).
  4. 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.
  5. 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.
  6. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
  7. 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.
  8. Xavier Gabaix, 2008. "Power Laws in Economics and Finance," NBER Working Papers 14299, National Bureau of Economic Research, Inc.
  9. Scalas, Enrico & Gallegati, Mauro & Guerci, Eric & Mas, David & Tedeschi, Alessandra, 2006. "Growth and allocation of resources in economics: The agent-based approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 370(1), pages 86-90.
  10. 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.
  11. Boris Podobnik & Davor Horvatic & Alexander M. Petersen & Branko Uro\v{s}evi\'c & H. Eugene Stanley, 2010. "Bankruptcy risk model and empirical tests," Papers 1011.2670, arXiv.org.
  12. 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.
  13. 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.
  14. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  15. 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 315-331, Part I, M.
  16. repec:rje:randje:v:37:y:2006:2:p:235-256 is not listed on IDEAS
  17. 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;EDP Sciences, vol. 41(2), pages 255-258, 09.
  18. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
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