Corporate Growth and Profitability
CEPR Discussion Paper Series No. 1431
Posted: 11 Sep 1996
Date Written: July 1996
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: Suggested Citation