Company-Size Effect on the Polish Stock Market

Because of higher financial and operating risks small firms are considered to carry higher investment risks than larger ones. Plenty of empirical research found that relatively small/large companies are characterized by relatively high/low long-term average returns as well as relatively high/low variability of these returns. However, findings of different studies are far from being unequivocal as regards statistical significance, scope, stability and even direction of the relationship between firm-size and long-term risks and returns. In this paper we examine the size-effect on the Polish stock market in 1999-2011 years, using four alternative company-size measures. Our research confirmed the existence of statistically significant and strong negative relationships between long-term stock returns and company-size (with all four company-size variables statistically significant). However, our findings as regards analogous relationships between portfolios' Betas and company-size turned out to be much more mixed