THE IMPACT OF THE EURO CRISIS ON THE FINANCIAL PERFORMANCE OF EUROPEAN AND NORTH AMERICAN FIRMS

In this paper, we investigate the impact of the changes in European percentage sales before and after the Euro crisis for both US-based and European-based companies, both overall and across industries. We find that larger firms are associated with a decrease in return on assets (ROAs) in the post-crisis era; the largtest of these large firms are associated with an increase in ROAs after the crisis. In addition, European (North American) headquartered companies experience a statistically significant decrease (increase) in European sales after controlling for the additional control variables such as industry. Overall, we note that companies which have lower European sales and strategically move their sales out of Europe after crisis experienced an increase in ROA. This result is robust after controlling for endogeneity issues. Copyright (C) 2013 John Wiley & Sons, Ltd.