Profit Persistence in the "Very" Long Run: Evidence from Survivors and Exiters

Abstract

One of the main shortcomings of the profit persistence literature is the fact that it looks only at surviving companies. This paper uses a unique dataset to analyze profit persitstence in two different stationary series: 85 surviving US companies from 1950-1999 and 72 exiters. While the exiters perform more competitive than the survivors there is still significant evidence for persitstence in both samples. Concentration and growth of the industry as well as size and volatility of profits seem to play an important role in explaining persistence.