Corporate Growth and Profitability

CEPR Discussion Paper Series No. 1431

Posted: 11 Sep 1996

See all articles by Paul A. Geroski

Paul A. Geroski

London Business School; Centre for Economic Policy Research (CEPR)

Stephen J. Machin

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); London School of Economics & Political Science (LSE) - Department of Economics

Chris F. Walters

London Business School

Date Written: July 1996

Abstract

This paper argues that current-period corporate growth rates reflect changes in current expectations about the long-run profitability of a firm. Using data on a balanced panel of 271 large, quoted U.K. firms over the period 1976-82, we report the existence of a positive, statistically significant and robust correlation between current-period growth rates and a natural measure of changes in current expectations about long-run profitability, namely changes in the stock market valuation of the firm.

JEL Classification: L1, L2

Suggested Citation

Geroski, Paul A. and Machin, Stephen J. and Walters, Chris F., Corporate Growth and Profitability (July 1996). CEPR Discussion Paper Series No. 1431, Available at SSRN: https://ssrn.com/abstract=4205

Paul A. Geroski (Contact Author)

London Business School ( email )

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London, London NW1 4SA
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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Stephen J. Machin

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Chris F. Walters

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

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