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Industry and Size Effects in Corporate Performance: An Empirical Research on Selected EU Countries

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  • Julia Koralun-Bereźnicka

Abstract

The aim of the paper is to analyse the influence of industry specific factors and firm size on corporate performance in the EU countries. Most of the hitherto analyses have focused on corporate performance reflected mainly in stock returns. This paper is one of the few attempts to consider fundamental ratios, which might also be useful indicators for investment decisions based on corporate performance. The analysis is meant to find whether the corporate performance reflected in financial ratios is affected by industry or size effect more, and therefore to compare the relative importance of the two effects. The financial ratios are obtained from harmonised aggregated financial statements published by the European Commission in the BACH database. The ratios characterize three major analytical areas of enterprises, i.e. their profitability, liquidity and solvency. The data analysed relates to three size groups, thirteen industries, ten countries and nine years: 1999-2007. The applied methodology includes analysis of variance and classification method of k-means grouping. Findings provide empirical evidence that in most cases the industry effect tends to dominate over the size effect.

Suggested Citation

  • Julia Koralun-Bereźnicka, 2014. "Industry and Size Effects in Corporate Performance: An Empirical Research on Selected EU Countries," International Journal of Financial Economics, Research Academy of Social Sciences, vol. 2(2), pages 34-42.
  • Handle: RePEc:rss:jnljfe:v2i2p1
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