Why leverage does not always deliver: Lessons from the performance of the top 50 industrial firms in Greece during the Great Depression

Ioanna-Sapfo Pepelasis, Stefanos Zarkos and Constantine Aivalis

Business History, 2020, vol. 62, issue 4, 663-685

Abstract: On the basis of a new data-set constructed from company balance sheets and profit and loss accounts (for 1927–1936), this article examines the performance of the top 50 industrial joint stock companies in Greece that survived the Great Depression. We combined descriptive statistics with panel data analysis, and our main findings are as follows: (1) the Great Depression had a rather mild impact on profitability; (2) the level of (financial or operating) leverage throughout the decade under review was lower than that prescribed in theory, and the best performers within the top 50 had a higher liquidity; (3) leverage did not produce the expected benefits (i.e. a higher capital investment) even when there were increasing industrial profits as in the post-crisis period.

Date: 2020
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DOI: 10.1080/00076791.2018.1476495

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