Profitability and optimal debt ratio of the automobiles and parts sector in the Euro area (original) (raw)

PurposeThe goal of this paper is twofold: to assess the influence of specific corporate and market features on automobiles and parts sector's profitability in Euro area and to identify this particular sector's optimum debt level.Design/methodology/approachFor the paper's purposes, the authors applied a panel data analysis on an annual basis for the period 2005–2017.FindingsThere is a strong statistical significance of debt ratio, growth domestic product per capita growth, E.C.'s economic sentiment index (ESI), the European Central Bank key interest rate and the Euro area crisis on sector's profitability, while weak statistical significance appears to emerge for the firm's size. Moreover, the authors find average 14.4% profitability for the entire sector of the Euro area, without significant fluctuations among firms and/or during the examined time period. Another interesting finding of this study is that results are consistent with the theory of Modigliani Mil...