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SUCCESSFUL IN THE LONG RUN: A META‐REGRESSION ANALYSIS OF PERSISTENT FIRM PROFITS
Author(s) -
Hirsch Stefan
Publication year - 2018
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/joes.12188
Subject(s) - persistence (discontinuity) , economics , econometrics , meta regression , econometric analysis , regression analysis , profit (economics) , meta analysis , regression , microeconomics , statistics , mathematics , medicine , geotechnical engineering , engineering
Abstract We study the profit persistence literature by applying meta‐regression analysis (MRA) to a set of 36 empirical papers, which analyze the persistence of abnormal firm profits over time. The analyzed literature provides evidence for a mediocre degree of persistence in abnormal profits. An initial analysis of the distribution of reported profit persistence estimates reveals some degree of excess variation. This points toward publication bias that favors significant results independent of their algebraic sign. The MRA, however, reveals that publication bias is particularly favoring results that indicate profit persistence and thus contradict the neoclassical model of perfect competition. Moreover, the MRA enables to control for heterogeneity driven by the study design. We find that the analyzed country (developing vs. developed), the applied econometric approach, as well as the analyzed period of time are significant drivers of heterogeneity in reported persistence estimates.