The Effect Of Financial/Economic Crisis On Firm Performance In Slovenia - A Micro Level, Difference-In-Differences Approach

The aim of the paper is to assess the effect of the financial/economic crisis on firm performance across different industry sectors in Slovenia. We employ unusually reach data set: in the analysis we include micro level accounting data on all Slovenian firms in the period from 2003 until 2010 (data for 2011 was not yet available). The analysis of the impact of financial/economic crisis on industry sectors in Slovenia is based on selected financial performance measures with the application of difference-in-differences approach. This is a quasi-experimental technique that measures the effect of a treatment at a given period in time. "Treatment" in our case is financial/economic crisis, which tend not to have a significant effect on some industries (i.e., control group) and have evident effect on other industries (i.e., treatment group). We find that the financial performance of firms was significantly poorer in treatment groups, confirming the negative effect of the financial/ economic crisis. Besides control group (industry sector A - Agriculture, forestry and fishing) for which we assumed to be less affected by the financial/economic crisis or not be affected at all, the industry sector B (Mining and quarrying) and financial indicator EBITDA margin seem not to be affected much from the financial/economic crisis. But for most industry sectors and financial indicators the effect of the crisis was evident/statistically significant. According to the results of the analysis, the financial/economic crisis had the most evident effect on return on equity and employee value added, and on industry sectors Electricity, gas, steam and air conditioning supply (D), Water supply, sewerage, waste management and remediation activities (E), and - of course - Construction (F).