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A Note on Gibrat's Law, Gibrat''s Legacy and Firm Growth: Evidence from Brazilian Companies

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  • Luiz A. Esteves

    (Federal University of Paraná and University of Siena)

Abstract

The aim of this work is to test the Gibrat's Law hypothesis for Brazilian firms. Gibrat''s Law establishes that firm growth is a random walk, it means that the probability of a given proportionale change in size during a specified period is the same for all firms in a given industry. This work uses information from manufacturing and services sectors, and it uses two different variables to compute firm growth: The growth of employment and the growth of value added. Gibrat''s Law was rejected for the complete sample of manufacturing and services firms - the smaller companies grow at larger rates. On the other hand, Gibrat''s Law is supported in both sectors when a subsample of large and well-established companies is used (Gibrat''s Legacy). These results corroborate the recent stylized facts of the literature.

Suggested Citation

  • Luiz A. Esteves, 2007. "A Note on Gibrat's Law, Gibrat''s Legacy and Firm Growth: Evidence from Brazilian Companies," Economics Bulletin, AccessEcon, vol. 12(19), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-07l10018
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    References listed on IDEAS

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    7. Richard E. Caves, 1998. "Industrial Organization and New Findings on the Turnover and Mobility of Firms," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 1947-1982, December.
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    Cited by:

    1. Marisa Reis Azevedo Botelho & Graciele Fátima Sousa & Michelle Castro Carrijo & Juliene Barbosa Ferreira & Ariana Cericatto Silva, 2022. "Survival determinants for Brazilian companies, 1996 to 2016," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(2), pages 233-266, June.
    2. Alina Steblyanskaya & Zhen Wang & Elena Ryabova & Svetlana Razmanova, 2019. "Russian Gas Companies’ Financial Strategy Considering Sustainable Growth," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(1), pages 231-241.
    3. de Carvalho, Antonio Gledson, 2008. "The Effect of Size and Institutional Development on the Growth of Brazilian Firms," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 62(4), December.
    4. Swati Agrawal & Poonam Singh & Mainak Mazumdar, 2021. "Innovation, Firm Size and Ownership: A Study of Firm Transition in India," International Journal of Global Business and Competitiveness, Springer, vol. 16(1), pages 15-27, June.

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    More about this item

    Keywords

    Firm Growth;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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