Mean Reversion in Profitability for Non-Listed Firms

Arbeitspapier

The presence of mean reversion in profitability at the firm level is important for valuation and prediction of growth and earnings. We investigate the mean reversion in accounting profitability for Norwegian non-listed firms for the period 1988-2006. We find a mean reversion rate of about 0.44. This is higher than found in other studies. We also find that small firms have a higher mean reversion rate than large firms. Previously, price-to-book ratios have been used to investigate changes in profitability over time for listed firms. We examine bankruptcy risk as an alternative variable for unlisted firms. We find that bankruptcy risk may help explain changes in profitability, but the results are not as strong as found in previous work.

Object Details

• ISBN: 978-82-7553-535-9
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2009/29

Classification and Topics

• Classification: Wirtschaft ; General Financial Markets: General (includes Measurement and Data) ; Corporate Finance and Governance: General
• Subject: non-listed firms ; profitability ; mean reversion

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Nordal, Kjell Bjørn ; Næs, Randi
• Event: Veröffentlichung
• (who): Norges Bank
• (where): Oslo
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/209945
• Last update: 10.03.2025, 11:42 AM CET