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The importance of industry classification in estimating concentration ratios

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  • Hrazdil, Karel
  • Zhang, Ray

Abstract

We compare different industry concentration ratios based on the Standard Industry Classification (SIC) system to ratios based on the Global Industry Classification Standard (GICS) system and demonstrate through the analysis of industry markups that GICS-based measures are better proxies for the actual industry concentration than SIC-based measures.

Suggested Citation

  • Hrazdil, Karel & Zhang, Ray, 2012. "The importance of industry classification in estimating concentration ratios," Economics Letters, Elsevier, vol. 114(2), pages 224-227.
    • Handle: RePEc:eee:ecolet:v:114:y:2012:i:2:p:224-227
    DOI: 10.1016/j.econlet.2011.10.001
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    References listed on IDEAS

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    1. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
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    7. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, April.
    8. Sanjeev Bhojraj & Charles M. C. Lee & Derek K. Oler, 2003. "What's My Line? A Comparison of Industry Classification Schemes for Capital Market Research," Journal of Accounting Research, Wiley Blackwell, vol. 41(5), pages 745-774, December.
    9. DeFond, Mark L. & Park, Chul W., 1999. "The effect of competition on CEO turnover1," Journal of Accounting and Economics, Elsevier, vol. 27(1), pages 35-56, February.
    10. Ashiq Ali & Sandy Klasa & Eric Yeung, 2009. "The Limitations of Industry Concentration Measures Constructed with Compustat Data: Implications for Finance Research," The Review of Financial Studies, Society for Financial Studies, vol. 22(10), pages 3839-3871, October.
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    Citations

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    Cited by:

    1. Noordewier, Thomas G. & Lucas, Marilyn T., 2020. "On being green and profitable: Does industry context matter?," International Journal of Production Economics, Elsevier, vol. 223(C).
    2. Zura Kakushadze & Willie Yu, 2017. "Open Source Fundamental Industry Classification," Data, MDPI, vol. 2(2), pages 1-77, June.
    3. Capucine Nobletz, 2021. "Return spillovers between green energy indexes and financial markets: a first sectoral approach," EconomiX Working Papers 2021-24, University of Paris Nanterre, EconomiX.
    4. Li, Scott & Liu, Qianqiu & Refalo, James, 2020. "Industry classification, product market competition, and firm characteristics," Finance Research Letters, Elsevier, vol. 36(C).
    5. Zhang, Jinhua & Mao, Rui & Wang, Jieyu & Xing, Mengying, 2021. "The way back home: Trading behaviours of foreign institutional investors in China amid the COVID-19 pandemic," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    6. Jhuma Mukhopadhyay & Indrani Chakraborty, 2017. "Competition and Industry Performance: A Panel VAR Analysis in Indian Manufacturing Sector," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(2), pages 343-366, June.
    7. Lis-Gutiérrez, Jenny-Paola, 2013. "Medidas de concentración y estabilidad de mercado. Una aplicación para Excel [Market concentration and market stability measures. An application for Excel]," MPRA Paper 47615, University Library of Munich, Germany.
    8. Matt Andrews & Peter Harrington, 2016. "Off Pitch: Football’s Financial Integrity Weaknesses, and How to Strengthen them," CID Working Papers 311, Center for International Development at Harvard University.
    9. Zura Kakushadze & Willie Yu, 2017. "Open Source Fundamental Industry Classification," Papers 1706.04210, arXiv.org, revised Dec 2017.
    10. Andrews, Matt & Harrington, Peter, 2016. "Off Pitch: Football's Financial Integrity Weaknesses, and How to Strengthen Them," Working Paper Series 16-009, Harvard University, John F. Kennedy School of Government.
    11. Nobletz, Capucine, 2022. "Green energy indices & financial markets: An in-depth look," International Economics, Elsevier, vol. 171(C), pages 80-109.
    12. Hrazdil, Karel & Trottier, Kim & Zhang, Ray, 2013. "A comparison of industry classification schemes: A large sample study," Economics Letters, Elsevier, vol. 118(1), pages 77-80.
    13. Karel Hrazdil & Thomas Scott, 2013. "The role of industry classification in estimating discretionary accruals," Review of Quantitative Finance and Accounting, Springer, vol. 40(1), pages 15-39, January.

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    More about this item

    Keywords

    Industry; Concentration; Markup; SIC; GICS;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General

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