The Multidimensionality of Firm Size

Posted: 26 Oct 1998

See all articles by Merridee L. Bujaki

Merridee L. Bujaki

Carleton University - Eric Sprott School of Business

Alan J. Richardson

University of Windsor - Odette School of Business

Abstract

"Firm size" is frequently used in accounting research as a proxy for theoretical constructs or as a control variable to mitigate missing variables bias. We provide empirical evidence that "firm size" is not uniquely related to a single theoretical construct and hence lacks construct validity. The lack of construct validity means that the interpretation of any empirical result with "firm size" as a variable is theoretically ambiguous. We apply cluster analysis and confirmatory factor analysis to data generated by a sample of accounting academics and identify five dimensions of the theoretical domain that have been proxied by measures of "firm size" in the literature. If empirical research is to generate theoretically interpretable results, refined proxies must be developed for each of these dimensions.

JEL Classification: M41, C31

Suggested Citation

Bujaki, Merridee L. and Richardson, Alan J., The Multidimensionality of Firm Size. Available at SSRN: https://ssrn.com/abstract=137928

Merridee L. Bujaki (Contact Author)

Carleton University - Eric Sprott School of Business ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S SB6
Canada
613-520-2600 x2774 (Phone)

Alan J. Richardson

University of Windsor - Odette School of Business ( email )

401 Sunset
Windsor N9B 3P4, Ontario
Canada

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