Testing of Gibrat’s law by panel data analysis: The case of Turkey

Abstract

Gibrat's Law of Proportionate Effect is one of the matters of debate that continue to be relevant in the finance literature. Gibrat’s Law argues that there is no relation between the size of the firms and their growth. In this study, it is aimed to test whether the Gibrat’s Law is valid in the firms traded in the Borsa Istanbul (BIST) Basic Metal Industry. For this purpose, quarterly data of 12 firms regularly traded in the BISTfrom 2010 to 2015 are used. The relationships between the variables used in the study are tested by using panel data analysis. According to the findings obtained, Gibrat’s Law is supported by some variables and it is also rejected by some variables. In other words, it has been reached to the conclusion that Gibrat’s Law is partially valid in the BIST Basic Metal Industry sector.