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

Abstract

Empirical studies find that firms in the same industry in different countries tend to have similar financial characteristics with increased integration. France, Germany, and U.K. have been members of the E.U. for over thirty years and they have integrated economies. In this study, we test the hypothesis that French, German, and U.K. firms have similar financial characteristics in the Chemicals and Allied Products manufacturing Industry (SIC 28). In our empirical test, we use the Multivariate Analysis of Variance (MANOVA) technique and nine well-known financial ratio averages computed with data from the DISCLOSURE/Worldscope database for the December 2001-December 2005 period. Our findings indicate that while overall financial characteristics of French, German and the U.K. chemical firms are significantly different, the liquidity, inventory turnover, return-on-assets, and return-on-equity ratios of firms in these three countries are not significantly different. The total-assets-turnover ratios of French firms and the operating-profit-margin ratios of German firms are significantly lower than those of firms in the other two countries. U.K. firms have significantly higher equity ratios (i.e., their debt ratios are significantly lower) compared with French and German firms. The sales growth rate is significantly higher in France and significantly lower in Germany compared with the other two countries. [PUBLICATION ABSTRACT]