Abstract
This paper studies the upper tail distribution of the business group size in Taiwan. Our empirical study wasbased on the top 100 Taiwan business groups ranked in annual revenue, asset and employees during 2003 to2009. We find that the group size distribution is fatter-tailed and gradually deviated from the Zipf’s Law.Moreover, the law of proportional effect is violated.Specifically, our result shows that the larger businessaccompanies larger growth rate.
Highlights
Gilbrat’s rule of proportional growth states that the growth rate of a firm is independent to its size. This leads to a lognormal firm size distribution and its upper tail taking the shape of Zipf’s distribution
This empirical study was based on the top 100 Taiwan business groups ranked in annual revenue, asset and employees, respectively
There is no significant evidence to show that the size of the groups deviate from the Zipf distribution, it is trivial that the coefficient gradually increases over time. This result is consistent to the implication that we suggest from Table 1, and finds that the group size distribution got more and more dispersed during the research period
Summary
Gilbrat’s rule of proportional growth states that the growth rate of a firm is independent to its size. Using data from different industries, different countries, and different firm size measures, this rule has been examined in a spate of literature for a long time (For a survey, see Sutton, 1997). This rule, is still debatable when examining empirical evidences. Stanley et al (1995) shows that the log-normal distribution fits US firms’ size, but in the upper tail Their result suggests the upper tail is relatively thin. This finding is confirmed by Fujiwara et al (2004) by studying the data of France and UK
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