Financial factors affecting profitability and employment growth: the case of Greek manufacturing

Abstract

The key financial determinants of firm profitability and employment growth are identified by using a panel of 3094 Greek manufacturing firms for 1995 and 1999, just before the country's accession to the European Monetary Union. The analysis includes stepwise regression models. The independent variables used are size, age, location and exports, as well as a number of financial ratios describing the asset structure, capital structure, reliance on debt, employee productivity and managerial efficiency. The results show that size, age, exports, debt structure, investment in fixed assets and profitability of assets and sales contribute significantly to firm growth. Econometric results also reveal that firm size, age, exports, sales growth, reliance on debt on fixed assets and investment growth, as well as efficient management of assets, influence profitability.