Evaluating corporate performance: empirical tests of a conservation law

Economic conservation laws can be applied to evaluate corporate behavior. This paper is an empirical application of conservation laws to individual companies and industries, and is the first extensive investigation using Japanese corporate data. The results are tentative because of data constraints, but they suggest that the assumption of a constant discount rate and profit-maximizing behavior of a firm is consistent with observed data for many top-performing Japanese firms for 1980-2002. More generally, the results suggest the possibility of new criteria for evaluating firm behavior.