What Drives Financial Performance in European Energy Companies? An Empirical Analysis

The energy sector is characterized by operational rules and specific policies that influence industrial competitiveness and energy security. Thus, companies in the energy sector are strongly affected by the macroeconomic environment, marked by political and social instability, making the understanding of the determinants of companies’ financial performance essential for assessing their financial health. This study aims to identify the most representative factors that may affect the financial performance of European energy companies over a period of 10 years, respectively 2014-2023. The estimation method employed is multiple regression using panel data with fixed and random effects. The financial performance is measured through two rates of margin, namely the EBIT margin and the EBITDA margin. The results suggest a positive influence from capital intensity, firm size, sales growth, price-to-book ratio, and a negative impact from inventory intensity, the effective tax rate, and the price-to-cash-flow ratio on financial performance. Furthermore, indebtedness and liquidity generate mixed effects. The results also indicate that the Covid-19 pandemic crisis negatively affected the financial performance, whereas the Russia-Ukraine war period is associated with a positive effect on EBIT margin and EBITDA margin. The study’s results may provide valuable insights for company managers, researchers, as well as investors concerned with corporate financial performance.