Firm Size And Firm Growth: Testing Gibrat’s Law On 17 Nigeria Manufacturing Industry (2000-2011)

Abstract

This study examines the relationship between firm growth and firm size using a time series dataset of 17 manufacturing industries in Nigeria from year 2000 to 2011. We tested for the validity of GIBRAT’s law on firms Growth and size .Our result shows that, the relationship between firm growth and size of manufacturing industries in Nigeria exits, but very sensitive with respect to the various definition of the variables employed. The growth rate is defined in terms of firms Value of production (ie Turnover), while the firms size was defined in terms of firms wages and salaries as well as firms Return on Assets. In estimating the growth rate, we controlled for other factors which directly influence the sampled firms such as capital structure, Technological innovation, strategic planning, expectations and attitude of managers. The rate of firms’ entry and exit amongst manufacturing firms in Nigeria prompted this study. The OLS regression model used emanated from the neo-classical theory