Corporate Stability and Economic Growth

Posted: 12 Jun 2003 Last revised: 12 Feb 2014

See all articles by Kathy Fogel

Kathy Fogel

Suffolk University - Department of Finance

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Bernard Yin Yeung

National University of Singapore - Business School

Date Written: April 1, 2003

Abstract

Greater instability in a country's list of top corporations is associated with faster economic growth. This faster growth is primarily due to faster growth in total factor productivity in industrialized countries, and faster capital accumulation in developing countries. These findings are consistent with the view that economic growth is more closely tied to the rise of new large firms than to the prosperity of established large firms. Although a stable list of leading corporations is highly correlated with government size, it is unrelated to other possible policy goals, such as (successful) income equalization and avoiding economic crises, it is related to other political factors. However, the list of top firms is more stable in countries with fewer rights for creditors in bankruptcy and with bank-based rather than stock market-based financial systems. These findings appear to oppugn arguments of the form "What's good for General Motors is good for America". We propose that political rent-seeking by large established firms underlies increased corporate stability.

Keywords: Growth, Economic System, Economics System

JEL Classification: G28, G38, O40, O57, P47

Suggested Citation

Fogel, Kathy and Morck, Randall K. and Yeung, Bernard Yin, Corporate Stability and Economic Growth (April 1, 2003). University of Alberta School of Business working paper. Available at SSRN: https://ssrn.com/abstract=412804

Kathy Fogel (Contact Author)

Suffolk University - Department of Finance ( email )

8 Ashburton Place-Beacon Hill
Boston, MA 02108-2770
United States

Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada
780-492-5683 (Phone)
780-492-3325 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

European Corporate Governence Institute ( email )

c/o ECARES ULB CP 114
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Belgium

Asian Bureau of Finance and Economic Research ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

Bernard Yin Yeung

National University of Singapore - Business School ( email )

15 Kent Ridge Drive
BIZ 1 Level 6
Singapore, 119245
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

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