Profitability of Defense Companies in the US and Europe

Jean Belin and Mahdi Fawaz
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Jean Belin: BSE - Bordeaux sciences économiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Mahdi Fawaz: Université Sorbonne Paris Nord

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Abstract: The profitability (ROA) of US and European defense companies are influenced by past profitability, debt policy, company size, and defense specialization. Taking into account the effect of these variables, individual company characteristics and time specificities, the profitability of US defense companies remains higher than that of European companies. Moreover, US defense firms are more profitable when specialized in defense, while European companies are more dependent on the civilian market and its evolution. The position of a company in the SIPRI ranking has a negative impact on American companies' profitability, while it positively influences European companies' profitability. These results could be due to excessive fragmentation (of orders and industries) on the European market and high concentration on the US market.

Keywords: Profitability (ROA); Defense companies; GMM system estimator; SIPRI (search for similar items in EconPapers)
Date: 2024-03-13
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Published in Defence and Peace Economics, 2024, 35 (4), pp.415-426. ⟨10.1080/10242694.2024.2329865⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04510078

DOI: 10.1080/10242694.2024.2329865

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