The Impact of Economic Crisis on the Financial Performance of the European Companies

Abstract

Financial-accounting information plays an important role in assessing and forecasting firms’ financial performance. But besides that, there are other external factors affecting the firm’s performance, such as the economic and financial crisis that causes imbalances over the economy and affect the business environment. Thus, based on financial statements data, in this paper, the determinants of financial performance are examined and also the impact of financial crisis on these factors is analysed using the fixed and random effects panel estimators. For this research it was used a sample of non-financial firms from European countries considering annual data from 2006 until 2015. The results achieved by panel data analysis show that crisis exerts a significant positive effect over financial performance as well as liquidity, assets turnover and labour productivity inducing that firms tend to do higher efforts to keep financial performance in face of a crisis. Financial performance is significantly and negatively influenced by leverage independently of the crisis effect showing that return on assets is lower than average interest rate.

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