Record Details

GIBRAT’S LAW AND LIQUIDITY CONSTRAINTS: EVIDENCE FROM MALAYSIA INDUSTRIAL SECTOR COMPANIES

International Journal of Economics, Management and Accounting

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Field Value
 
Title GIBRAT’S LAW AND LIQUIDITY CONSTRAINTS: EVIDENCE FROM MALAYSIA INDUSTRIAL SECTOR COMPANIES
 
Creator Harkati, Rafik
Mohamad, Azhar
 
Description Gibrat’s Law, or the Law of Proportionate Effect (LPE), presupposes that the growth rate of a given company is independent of its initial size. While older studies have a tendency to confirm the LPE, recent studies generally reject it. Only very few empirical studies have examined the validity of Gibrat’s Law in developing countries, with most studies focused on developed countries. In this study, we investigated the validity of the LPE in Malaysia. We also investigated whether liquidity constraints have any influence on firm growth and firm growth-size dynamics. By employing the Generalized Method of Moments (GMM) system to estimate a panel data model of the firm growth of 210 firms that were part of the Malaysian industrial sector from 2005 to 2014, we found that Gibrat’s Law was invalid and liquidity constraints had no role in explaining both the firms’ growth and growth-size dynamics, whereas age was found to positively affect the firms’ growth.
 
Publisher Kulliyyah of Economics and Management Sciences
 
Date 2016-11-29
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://journals.iium.edu.my/enmjournal/index.php/enmj/article/view/357
 
Source International Journal of Economics, Management and Accounting; Vol 24 No 2 (2016); 135-161
2462-1420
 
Language eng
 
Relation http://journals.iium.edu.my/enmjournal/index.php/enmj/article/view/357/211