A comparative analysis on the performance of publicly traded companies in Europe

Abstract

The two main objectives of this dissertation were to find correlations and quantitative linear relationships between a number of dependent variables with multiple independent variables for several publicly traded companies in Europe. This dissertation takes on a quantitative approach because it has selected two statistical models that are used to reach the objectives. The first model that was selected was Multiple Correlation Coefficient which tests the level of correlation between the X variables with the Y variables. The second model that is used for this study was Multiple Linear Regression. This statistical model tests multiple X variables with a single Y variable and generates an equation that represents the linear relationship between the significant variables. The dependent variables that were tested were Return on Assets, Current Ratio and Debt/Equity Ratio. All of these ratios were calculated from the interim/annual financial statements published by the companies. When it came to the independent variables, the ones selected were Investments in Assets, Price Changes and Volume Changes. The first of which was also found in the financial statements whilst for the other two the data was generated from the stock markets. When it came to the selection of data the companies were all public traded in Europe that came from different sectors and countries. Some of the sectors selected were software, telecommunications, pharmaceuticals, car manufactures and much more. Some of the countries that were tested included Malta, France, Italy, United Kingdom and more. The results from this study varied showing some which were very significant that showed linear relationship and correlations between the selected independent and dependent variables. There were some specific tests where this model was not successful, this can be due to limitations that this dissertation faced. There were some shortcomings when carrying out this study and for that reason there are a number of recommendations proposed which can help improve future studies in the area of performance evaluation using financial ratio analysis.