Do firms share the same functional form of their growth rate distribution? A new statistical test

TL;DR

This paper presents a new statistical test to determine if firms share the same growth rate distribution, revealing that homogenous panels of firms can often be described by a common distribution form.

Contribution

The paper introduces a novel statistical test for comparing growth rate distributions across firms and applies it to real-world data, highlighting differences at sector and subsector levels.

Findings

Hypotheses rejected at sector level for most firms

Hypotheses not rejected at subsector level

Homogeneous firm panels may share a common growth distribution

Abstract

We introduce a new statistical test of the hypothesis that a balanced panel of firms have the same growth rate distribution or, more generally, that they share the same functional form of growth rate distribution. We applied the test to European Union and US publicly quoted manufacturing firms data, considering functional forms belonging to the Subbotin family of distributions. While our hypotheses are rejected for the vast majority of sets at the sector level, we cannot rejected them at the subsector level, indicating that homogenous panels of firms could be described by a common functional form of growth rate distribution.