Advertisement

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

  • Einar Jón Erlingsson
  • Simone Alfarano
  • Marco Raberto
  • Hlynur Stefánsson
Regular Article

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 2,818 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 US 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 US 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.

Keywords

Firm size Profit rates Growth rates Power law Laplace distribution Icelandic firms 

JEL Classification

C12 D01 D22 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Alfarano S, Milakovic M (2008) Does classical competition explain the statistical features of firm growth. Econ Lett 101(3): 272–274CrossRefGoogle Scholar
  2. Alfarano S, Milakovic M, Irle A, Kauschke J (2012) A statistical equilibrium model of competitive firms. J Econ Dyn Control 36(1):136–149. doi: 10.1016/j.jedc.2011.07.002; http://www.sciencedirect.com/science/article/pii/S0165188911001424 Google Scholar
  3. Atalay E, Hortasu A, Roberts J, Syverson C (2011) Network structure of production. Proc Natl Acad Sci 108(13): 5199CrossRefGoogle Scholar
  4. Axtell R (2001) Zipf distribution of us firm sizes. Science 293(5536): 1818CrossRefGoogle Scholar
  5. Baek S, Bernhardsson S, Minnhagen P (2011) Zipf’s law unzipped. New J Phys 13: 043004CrossRefGoogle Scholar
  6. Bottazzi G, Secchi A (2006) Explaining the distribution of firm growth rates. RAND J Econ 37(2): 235–256CrossRefGoogle Scholar
  7. Champernowne D (1953) A model of income distribution. Econ J 83: 318–351CrossRefGoogle Scholar
  8. Cincotti S, Raberto M, Teglio A (2010) Credit money and macroeconomic instability in the agent-based model and simulator eurace. The Open-Access, Open-Assessment E-Journal 4(2010-26)Google Scholar
  9. Cirillo P (2010) An analysis of the size distribution of Italian firms by age. Phys A Stat Mech Appl 389(3): 459–466CrossRefGoogle Scholar
  10. Cirillo P, Hüsler J (2009) On the upper tail of italian firms’ size distribution. Phys A Stat Mech Appl 388(8): 1546–1554CrossRefGoogle Scholar
  11. Clauset A, Shalizi C, Newman M (2009) Power-law distributions in empirical data. SIAM Rev 51(4): 661–703CrossRefGoogle Scholar
  12. De Wit G (2005) Firm size distributions: an overview of steady-state distributions resulting from firm dynamics models. Int J Ind Org 23(5–6): 423–450CrossRefGoogle Scholar
  13. Delli Gatti D, Guilmi C, Gaffeo E, Giulioni G, Gallegati M, Palestrini A (2005) A new approach to business fluctuations: heterogeneous interacting agents, scaling laws and financial fragility. J Econ Behav Org 56(4): 489–512CrossRefGoogle Scholar
  14. Farmer J, Foley D (2009) The economy needs agent-based modelling. Nature 460(7256): 685–686CrossRefGoogle Scholar
  15. Gabaix X (2009) Power laws in economics and finance. Annu Rev Econ 1(1): 255–294CrossRefGoogle Scholar
  16. Gibrat R (1931) Les In覡lits Economique. Sirely, ParisGoogle Scholar
  17. Goldstein M, Morris S, Yen G (2004) Problems with fitting to the power-law distribution. Eur Phys J B Condens Matter Complex Syst 41(2): 255–258CrossRefGoogle Scholar
  18. Ijiri Y, Simon HA (1974) Interpretations of departures from the pareto curve firm-size distributions. J Polit Econ 82(2): 315–331CrossRefGoogle Scholar
  19. Myers S (1984) The capital structure puzzle. J Financ 39(3): 575–592CrossRefGoogle Scholar
  20. Podobnik B, Horvatic D, Petersen A, Uroevi B, Stanley H (2010) Bankruptcy risk model and empirical tests. Proc Natl Acad Sci 107(43): 18325CrossRefGoogle Scholar
  21. Puig P, Stephens M (2000) Tests of fit for the Laplace distribution, with applications. Technometrics 42(4): 417–424CrossRefGoogle Scholar
  22. Raberto M, Teglio A, Cincotti S (2012) Debt deleveraging and business cycles. An agent-based perspective. Economics: The Open-Access, Open-Assessment E-Journal 6(2012-27), doi: 10.5018/economics-ejournal.ja.2012-27
  23. Scalas E, Gallegati M, Guerci E, Mas D, Tedeschi A (2006) Growth and allocation of resources in economics: the agent-based approach. Phys A Stat Mech Appl 370(1): 86–90CrossRefGoogle Scholar
  24. Simon H, Bonini C (1958) The size distribution of business firms. Am Econ Rev 48(4): 607–617Google Scholar
  25. Smets F, Wouters R, Europeo BC (2002) An estimated stochastic dynamic general equilibrium model of the Euro area. European Central Bank, FrankfurtGoogle Scholar
  26. Stanley M, Amaral LAN, Buldyrev SV, Leschhorn H, Maass P, Salinger M, Stanley HE (1996) Scaling behavior in the growth of companies. Nature 379: 804–806CrossRefGoogle Scholar
  27. Wagner F, Milaković M, Alfarano S (2010) Firm profitability and the network of organizational capabilities. Phys A Stat Mech Appl 389(21): 4769–4775CrossRefGoogle Scholar

Copyright information

© Springer-Verlag 2012

Authors and Affiliations

  • Einar Jón Erlingsson
    • 1
  • Simone Alfarano
    • 2
  • Marco Raberto
    • 3
  • Hlynur Stefánsson
    • 1
  1. 1.Reykjavik UniversityReykjavíkIceland
  2. 2.Universitat Jaume ICastellónSpain
  3. 3.DIME-DOGE.IUniversità à di GenovaGenoaItaly

Personalised recommendations