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A Comparison of the Financial Characteristics of German and French Manufacturing Firms

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Listed:
  • Ilhan Meric
  • Kathleen Dunne
  • Wayne Smeltz
  • Gulser Meric

Abstract

Comparing the financial characteristics of different groups of firms with financial ratios has been a popular methodology in finance. In this paper, we compare the financial characteristics of German and French manufacturing firms with the MANOVA (multivariate analysis of variance) statistical technique. Germany and France are members of the European Union and they have fully integrated economies with a common currency and yet, we find that financial characteristics of German and French manufacturing firms are significantly different. German manufacturing firms have significantly higher liquidity, asset turnover, and equity ratios compared with French manufacturing firms. Despite a high level of economic integration, German and French manufacturing firms appear to preserve their deep-rooted country business traditions. German manufacturing firms lower their technical insolvency risk by maintaining a significantly higher level of liquidity compared with French manufacturing firms. German manufacturing firms also reduce their bankruptcy risk by using more equity financing and less debt financing compared with their French counterparts. The profitability and sales growth ratios of manufacturing firms in the two countries are not significantly different. Although asset turnover ratios are higher in German manufacturing firms than in French manufacturing firms, French firms are able to boost their return on equity to the level in German manufacturing firms by using more debt financing and financial leverage.    Â

Suggested Citation

  • Ilhan Meric & Kathleen Dunne & Wayne Smeltz & Gulser Meric, 2013. "A Comparison of the Financial Characteristics of German and French Manufacturing Firms," Accounting and Finance Research, Sciedu Press, vol. 2(1), pages 1-32, February.
    • Handle: RePEc:jfr:afr111:v:2:y:2013:i:1:p:32
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    References listed on IDEAS

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    1. Meric, Gulser & Leveen, Serpil S & Meric, Ilhan, 1991. "The Financial Characteristics of Commercial Banks Involved in Interstate Acquisitions," The Financial Review, Eastern Finance Association, vol. 26(1), pages 75-90, February.
    2. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    3. Meric, Ilhan & Meric, Gulser, 1994. "A comparison of the financial characteristics of U.S. and Japanese manufacturing firms," Global Finance Journal, Elsevier, vol. 5(2), pages 205-218.
    4. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    5. Stevens, Donald L., 1973. "Financial Characteristics of Merged Firms: A Multivariate Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 8(2), pages 149-158, March.
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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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