Analysis of Risk Factors Affecting Firms’ Financial Performance—Support for Managerial Decision-Making

Abstract

This paper aims to investigate how financial variables and exogenous crises influence firms’ financial performance, and how these factors may help managers in decision-making to increase their firm’s wealth. The dynamic interactions among variables were studied by applying a panel vector autoregressive model using annual data for a sample of non-financial firms from European countries. Results indicate that liquidity, leverage and productivity positively affect firm performance, while solvency and asset turnover are positive and statistically significant only in the case of return on equity. Labour productivity induces that firms tend to display larger efforts to keep financial performance in face of a crisis, considering that the crisis reveals a negative statistical impact over return on assets.

Determinants of wine firms’ performance: the Iberian case using panel data

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The Essence Of Behavioral Leverage In Business Management

“…Both operating and financial leverages take into account objective factors that affect the potential for profit. But, in addition to objective factors, there are also subjective factors that also have a significant impact on the potential business profitability (Bărbută-Misu et al, 2019). The key subjective factor in making strategic decisions is the financial mentality of the company's owners and / or managers.…”

Evaluating the Performance of the Enterprise in the Telecommunications Sector and the Impact of R&D on Profitability

“…Other study (Saleem and Rehman, 2011) [10], applied a linear regression model to determine the correlation between the liquidity and profitability indicator, and the empirical results of the study confirmed that there exist an important control of liquid ratio on ROA whereas there is an insignificant effect on ROE indicator. In his study, (Bărbuță-Mișu et al, 2019) [3] analyse what are the possible factors able to influence the financial performance level, in firms of the European Union, given the crisis period effect. They presented the risk factors capable to affect asset values and firms' financial performance, but in the paper, they have been highlighting the following factors: borrowed capital repayment and labour productivity, leverage, solvency, asset turnover, liquidity as representing indicators that are affected by a potential financial crisis.…”

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