Did Financial Performance of European Firms Improve and Converge after Introduction of the Euro?

This paper examines the effect of the Euro on financial performance of companies in the European countries. The main objective is to study the impact of the financial liberalization on firm performance in individual countries, and on cross-country convergence of firms in different aspects of financial performance, including profitability, investment, leverage, and firm valuation. This research finds evidence of improvements in financial performance for European companies after the introduction of the Euro. Furthermore, evidence points at significant convergence in financial performance for countries that implemented the common currency. Overall, financial liberalization had a positive effect on firm performance in Europe