Financial Implications of Covid-19 Pandemic. An Empirical DuPont Analysis on Economic Value-Added Reported by European Developed Countries

Abstract

The recent COVID-19 pandemic has raised various concerns related to firms’ financial vulnerabilities and resilience. The best way to achieve financial resilience is to identify drivers of sustainable economic development, mainly resumed to strategies designed aiming for shareholders’ value creation. The way firms’ resources are allocated indicate the premises for reaching the potential of value creation. This study provides a general picture of firms’ capacity to create value add. For this purpose, was performed a factorial analysis, considering a DuPont model. The analysis is performed on a sample of firms originating from well-developed European economies, considering a four-based DuPont factorial model analysis. For a better understanding of the contribution of each financial ratio of the DuPont financial analysis model, a CHAID decision tree was estimated. The results show generalized effects on the calculated economic value-added indicator, no matter the country firms considered in the analysis are originated from, or the industry the operate in. However, in 2020, most of the firms have reported significantly better results in terms of economic value-added, so, an essential part of the discussion is related to the impact of savings made on the cost of the economic capital.

Keywords

• economic value-added
• dupont analysis
• cost of capital
• resilience
• covid-19