piraeus bank group


Greek enterprises before and after the economic crisis (2007-2012)

Purpose of the study:

  • Are Greek enterprises overleveraged?
  • Do the key financial ratios differ depending on the size of enterprises?
  • How has the crisis influenced their fundamentals?

These are some of the key questions that we receive most frequently from both colleagues internally in Piraeus Bank and from analysts outside the Bank.

To answer these questions, we examine a range of ratios of capital structure, liquidity and profitability of an extensive sample of small, medium-sized and large enterprises for the year 2007 (pre-crisis) and 2012, the year at which we believe the crisis was in its peak.

The starting point of our analysis is the fact that the comparison – either over time (i.e. between consecutive years) or cross-sectioned (i.e. analysis of differences between small, medium-sized and large enterprises at a given time) – of the mean value of some ratios is fragmentary or even misleading (as in cases of non-symmetric distributions or distributions with extreme observations, averages are not representative).

Our basic methodological approach involves using non-parametric techniques to represent diagrammatically the entire distribution of the examined ratios, thereby displaying in a direct way the full picture of our entire sample based only on primary data, without the interposition of any exogenous assumption.

Finally, we use statistical non-parametric hypothesis tests (Median Test and Kolmogorov-Smirnov Test) in order to identify if there are any differences between enterprises depending on their size or if enterprises of the same size have differences at different times.

Capital Structure, Liquidity, Profitability

In our analysis, we placed more emphasis on the capital structure of the enterprises as our field of interest was the examination of the level of debt by size of enterprise, both at a cumulative level through the ratios debt to equity and equity to total assets, and at the current level through the ratio interest expenses to operating revenue.

At the same time, it is interesting to analyze how the level of liquidity and profitability differs depending on enterprise size. For this purpose, we examine the current ratio and net profit margin respectively. We believe the total of these ratios gives us a complete picture of the financial course of Greek enterprises.

Finally, in order to identify the degree of impact of the economic recession on domestic entrepreneurship, as we have mentioned before, we chose to examine the financial situation of enterprises at two time snapshots, in 2007 – the year before the crisis – and in 2012 – the year of deep recession.

Key findings: Capital Structure

  • When we examine the levels of leverage of Greek enterprises (measured by debt to equity and equity to total assets) we find that, both in 2007 and in 2012, small Greek enterprises were operating with lower levels of leverage.
  • However, both in 2007 and in 2012 the leverage levels of medium-sized and large enterprises are similar.
  • When we compare the evolution of leverage from 2007 to 2012, we notice that there has been a significant deleveraging in all three categories, especially when it comes to small enterprises.

Regarding the degree of ability to service debt, as can be reflected by the ratio of interest expenses to operating revenue of enterprises, it was generally found that:

  • There are differences between the distribution of the ratio depending on the size of the enterprises both in 2007 and in 2012.
  • For small and medium-sized businesses, the median coverage of interest from operating revenue remained at the same levels, although the overall distributions changed.
  • One of the most interesting findings is that the degree of coverage of interest expenses from operating revenue did NOT change for large companies between 2007 and 2012.

Key findings: Profitability

After analyzing the distributions of net profit margin of small, medium-sized and large enterprises we conclude that:

  • The profit margins of the small businesses differ significantly from those of medium-sized and large enterprises.
  • However, the profit margins of medium-sized and large enterprises do not differ substantially in either 2007 or in 2012.
  • Comparing the profit margins in 2007 and 2012 we see a significantly shift of the distributions of Greek enterprises to the left (i.e. towards smaller or even negative margins) for all three categories of enterprises.

Key findings: Liquidity

On the issue of liquidity, as reflected by the ratio of current assets to short-term liabilities, the picture is as follows:

  • The liquidity levels in 2007 did not differ considerably depending on the size of the enterprise. However, the characteristics of liquidity differed significantly in late 2012.
  • Between 2007 and 2012, the liquidity levels of small and medium-sized enterprises had significantly worsened.
  • Conversely, the liquidity levels of large enterprises did not changed between 2007 and 2012.


Ilias Lekkos

Group Chief Economist