Country and size effects in financial ratios: a European perspective

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Description/Abstract

Harmonised aggregate financial statements are published by the European Commission in the BACH database. This information is organised by country, size of firm, and year. Financial ratios obtained from this database are analysed using multivariate statistical techniques in order to explore country and size effects. The data relates to three size groups, eleven countries, fourteen years, and fifteen financial ratios. It is found that financial ratios reflect the size of the firm, but that the way in which this is reflected varies between the different countries. It is also found that there are no significant size related differences in financial profitability, but that such differences appear when countries are compared. Important regularities are found over time. Some time effects are also found in the way countries react to the business cycle.