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THE IMPACT OF THE SOVEREIGN-DEBT CRISIS ON THE FINANCIAL HEALTH OF GREEK LISTED COMPANIES
Peter J. Stavroulakis
Thesis Supervisor: Asst. Professor Dr. Panayiotis G. Artikis, University of Piraeus
AGRICULTURAL UNIVERSITY OF ATHENSDEPT. OF AGRICULTURAL ECONOMICS & RURAL DEVELOPMENT
POSTGRADUATE STUDIES PROGRAMME: MBA in AGRIBUSINESS MANAGEMENT
POSTGRADUATE THESIS
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Research Questions
What is the temporal financial ratio behaviorof listed firms operating within a sovereign-debt crisis?
As a corollary, how does financial activity andperformance offset with the crisis ?
Is data mining, clustering, pattern recognitionand trend extraction (forecasting) of the timeseries effective?
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Data Source: Bloomberg Database
Database Dissection: FTSE International ICB
ICB divides economic activity in:
10 industries 41 sectors 114 subsectors
This study focuses on 9 of the 10 industries:
Basic Materials, Consumer Goods, Consumer Services,Health Care, Industrials, Oil & Gas, Technology,Telecommunications and Utilities
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Financial Ratios
Domains: Liquidity, Profitability, Activity,Growth, BS Structure, Financial Leverage, BSSize, Operating Performance, Valuation
Ratios Calculated: Cash ratio, ROA, ROE, NetProfit Margin, Asset Turnover, CAPEX Ratio,PP&E Ratio, Financial Leverage, Size,Productivity,Tobin’s Q
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Time Span
Eleven years: 2001-2011
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Sovereign-economy
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Dynamic Sample
All listed corporations from the selected 9 industries
Dynamic sample:
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Average
1 Basic Materials 24 24 24 25 25 25 25 25 25 25 25 25
2 Consumer Goods 66 68 69 69 69 69 69 70 70 70 70 69
3 Consumer Services 38 39 39 40 40 40 40 41 41 41 41 40
4 Health Care 9 9 9 9 9 9 9 9 10 10 10 9
5 Industrials 57 57 57 57 59 59 59 59 60 60 60 59
6 Oil & Gas 2 2 2 2 2 2 2 2 2 2 2 2
7 Technology 19 20 20 20 20 21 22 24 24 25 24 22
8 Telecommunications 2 2 2 2 2 2 2 1 1 1 1 2
9 Utilities 3 3 3 4 4 4 4 4 4 4 4 4
220 224 225 228 230 231 232 235 237 238 237 231
Year
Industry
Total
Number of Hellenic Listed Firms / Industry Classification
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Methodology
Positive analysis: The financial ratios of 231listed firms are calculated and the averages ofthe 9 industries are extracted (from231*11*11 = 27,951 ratios calculated we areled to 9*11*11=1,086 industry averages)
Forecasting: From the time series of thefinancial ratios a linear regression model isgenerated (9*11=99 linear regression modelsin total)
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Specifics
One-way ANOVA for the industries as groups: allp-values are less than the 0.05 significance level
Regression model diagnostics: coefficients ofdetermination, adjusted coefficients ofdetermination, residuals and (mean & single)prediction bands, parameter confidenceintervals, ANOVA and t-tests
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Selected Empirical Findings
Findings are presented by industry
Selection based on the interest andpeculiarity of findings, as well as theeffectiveness (or ineffectiveness) of the linearregression
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Basic Materials: Size and ROA
Size
R^2=92%
p-value=3.6*10^-6
ROA
R^2=66%
p-value=0.0022
2 4 6 8 10 12 14
2
1
0
1
2
3
2 4 6 8 10 12 140
100
200
300
400
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Consumer Goods: ROE and CAPEX
ROE
R^2=76%
p-value=0.0005
CAPEX
R^2=80%
p-value=0.0002
2 4 6 8 10 12 14
30
20
10
0
2 4 6 8 10 12 14
7
6
5
4
3
2
1
0
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Consumer Services: Activity and Leverage
2 4 6 8 10 12 141.08
1.10
1.12
1.14
1.16
1.18
1.20
Sales/TA
R^2=1%
p-value=0.77
2 4 6 8 10 12 14
26
28
30
32
34
36
38
Financial Leverage
R^2=74%
p-value=0.0007
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Health Care: Net Profit Margin and Productivity
Net Profit Margin
R^2=45%
p-value=0.0233
Productivity
R^2=72%
p-value=0.0019
2 4 6 8 10 12 14
60
50
40
30
20
10
0
10
2 4 6 8 10 12 140.00
0.05
0.10
0.15
0.20
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Industrials: Activity and BS Structure
Activity
R^2=82%
p-value=0.0001
PP&E/TA
R^2=76%
p-value=0.0005
2 4 6 8 10 12 14
0.55
0.60
0.65
0.70
0.75
2 4 6 8 10 12 14
40
42
44
46
48
50
52
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Oil & Gas: Size and Operating Performance
Size
R^2=96%
p-value=1.4*10^-7
Productivity
R^2=73%
p-value=0.0008
2 4 6 8 10 12 140
1000
2000
3000
4000
2 4 6 8 10 12 140.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
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Technology: Net Profit Margin and Tobin’s Q
Net Profit Margin
R^2=85%
p-value=0.00006
Tobin’s Q
R^2=70%
p-value=0.0012
2 4 6 8 10 12 14
15
10
5
0
5
2 4 6 8 10 12 140.0
0.5
1.0
1.5
2.0
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Telecommunications: Leverage and Tobin’s Q
Leverage
R^2=78%
p-value=0.0003
Tobin’s Q
R^2=44%
p-value:0.026
2 4 6 8 10 12 140
10
20
30
40
50
2 4 6 8 10 12 140.0
0.5
1.0
1.5
2.0
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Utilities: Activity and Operating Performance
Activity
R^2=81%
p-value=0.0002
Productivity
R^2=76%
p-value:0.0047
2 4 6 8 10 12 14
0.26
0.28
0.30
0.32
0.34
0.36
0.38
2 4 6 8 10 12 140.00
0.05
0.10
0.15
0.20
0.25
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Average Cash RatioAverageMinimumMaximum
2002 2004 2006 2008 20100.0
0.2
0.4
0.6
0.8
1.0
Averages of all the industries
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Profitability
ROA
2002 2004 2006 2008 2010
30
20
10
0
10
Average profitability displays more of a long-term trend.
2002 2004 2006 2008 2010
60
40
20
0
20
Net Profit Margin
AverageMinimumMaximum
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ROE
2002 2004 2006 2008 2010
200
150
100
50
0
50
AverageMinimumMaximum
Average Return on Equity
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Activity
Average Revenue/TA
AverageMinimumMaximum
2002 2004 2006 2008 2010
0.5
1.0
1.5
2.0
2.5
3.0
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Growth
Average CAPEX/TA
AverageMinimumMaximum
2002 2004 2006 2008 2010
30
25
20
15
10
5
0
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BS Structure
Average PPE/TA
AverageMinimumMaximum
2002 2004 2006 2008 2010
30
40
50
60
70
80
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Leverage
Average TD/TA
AverageMinimumMaximum
2002 2004 2006 2008 2010
20
30
40
50
60
Average financial leverage has grown by only 15%.
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Size
Average TA
2002 2004 2006 2008 20100
500
1000
1500
2000
AverageMinimum
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Operating Performance
Productivity: Revenue / Employees
2002 2004 2006 2008 2010
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Average productivity is rising substantially.
AverageMinimum
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Valuation
Average Tobin’s Q
AverageMinimumMaximum
2002 2004 2006 2008 2010
0.5
1.0
1.5
2.0
2.5
3.0
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Qualitative conclusions
Although the crisis is evident, we have topoint out the discrepancy of GDP andProfitability
The data hints to a longitudinal crisis and notonly a sovereign-debt crisis
The find concerning Size, Profitability,Leverage and Productivity could beconsidered as worthy of further investigation
The flags raised may facilitate direction ofstrategic selections
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Linear Model Effectiveness
Ratio Materials Goods Services Health Industrials Oil & Gas Tech Telecom Utilities Min Max
Cash Ratio 64% 50% 33% 1% 36% 16% 2% 2% 26% 1% 64%
ROA 66% 74% 74% 45% 80% 28% 70% 0% 59% 0% 80%
ROE 19% 76% 58% 34% 77% 32% 61% 7% 74% 7% 77%
Net Profit Margin 61% 71% 72% 45% 39% 19% 85% 0% 34% 0% 85%
Asset Turnover 15% 4% 1% 61% 82% 4% 68% 2% 81% 1% 82%
CAPEX/TA 4% 80% 5% 0% 1% 0% 0% 1% 29% 0% 80%
PPE/TA 81% 85% 84% 83% 76% 0% 70% 50% 34% 0% 85%
Leverage 57% 69% 74% 68% 88% 62% 42% 78% 30% 30% 88%
Size 92% 85% 93% 68% 96% 96% 32% 73% 70% 32% 96%
Productivity 66% 76% 0% 72% 17% 73% 15% 13% 76% 0% 76%
Tobin's Q 58% 56% 54% 28% 64% 43% 70% 44% 3% 3% 70%
Ratio Materials Goods Services Health Industrials Oil & Gas Tech Telecom Utilities Min Max
Cash Ratio 0.003101 0.014563 0.063211 0.761005 0.051040 0.282695 0.671381 0.719002 0.131191 0.003101 0.761005
ROA 0.002229 0.000624 0.000659 0.023785 0.000192 0.092825 0.001312 0.951097 0.005731 0.000192 0.951097
ROE 0.179878 0.000451 0.006329 0.060822 0.000368 0.071846 0.004577 0.431924 0.000722 0.000368 0.431924
Net Profit Margin 0.004590 0.001094 0.000901 0.023264 0.041239 0.177005 0.000056 0.933236 0.057856 0.000056 0.933236
Asset Turnover 0.246392 0.568663 0.772800 0.004613 0.000119 0.570033 0.001711 0.674616 0.000175 0.000119 0.772800
CAPEX/TA 0.633165 0.000194 0.527668 0.938730 0.779397 0.910097 0.867751 0.800639 0.164870 0.000194 0.938730
PPE/TA 0.000146 0.000052 0.000066 0.000106 0.000474 0.839491 0.001228 0.015168 0.058671 0.000052 0.839491
Leverage 0.007177 0.001489 0.000732 0.001717 0.000019 0.004167 0.030527 0.000334 0.078317 0.000019 0.078317
Size 3.6*10^-6 0.000062 1.5*10^-6 0.001731 1.1*10^-7 1.4*10^-7 0.068415 0.000782 0.001421 1.4*10^-7 0.068415
Productivity 0.002429 0.000441 0.960309 0.001913 0.214786 0.000791 0.234415 0.311693 0.004740 0.000441 0.960309
Tobin's Q 0.006420 0.007761 0.009901 0.093448 0.003101 0.027910 0.001233 0.025816 0.600904 0.001233 0.600904
Coefficients of Determination
p-values
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Limitations and Future Directions
Outcomes are dependant on methodology;conclusions should be extracted with caution
Further analysis/comparison with othereconomies would facilitate normativeconclusions
Extension of industry dissection and ratios
Comparison of the linear regression modelswith other forecasting methodologies
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Thank you for your attention!