The Impact of the 2008 Global Financial Crisis on Non-Financial Firms Profitability: A Case from the USA

No doubt USA has greatest economy on the globe and the 2008 global financial crisis originated from the US subprime mortgage market. As a consequence of the crisis, most of the countries in worldwide experienced financial and economy crisis. The essential objective of this thesis is to investigate the impact of the 2008 global financial crisis on the profitability of US non-financial firms as well as to examine the determinants of the profitability of US non-financial firms. To do so, panel data methodology has been implemented. The sample of 42 non-financial firms from 8 different sectors has been considered, the sample has been chosen from NYSE and NASDAQ listed companies. The time interval has been determined from 2004 to 2011. To run the two sample hypothesis tests for two different means, the period has been divided into two broad periods, pre-crisis from 2004 to 2007 and post-crisis from 2008 to 2011. Regarding the 1st, 2nd, and 3rd hypotheses to investigate the changes in the profitability of the sampled firms, the time interval considered as pre and post crisis. However, the hypothesis 4 to 8 of the study that investigates the impact of explanatory variables on the explained variable has been tested over the entire period of 2004-2011. The variables of this thesis are fetched from literature accordingly NI, ROA, and ROE are the profitability measurements and represent the dependent variables, on the other hand the explanatory variables are size, growth opportunity, liquidity, leverage, and tangibility of assets. Statistics and econometrics techniques that used in this research are descriptive statistics, two-sample hypothesis test, correlation matrix, multicollinearity, homoscedasticity, autocorrelation, panel unit root test, and OLS regression analysis with fixed effect. The study has shown that net income of non-financial firms has increased significantly after the crisis. However, return on assets of our sample decreased significantly after the crisis but the return on equity decreased by a big volume, however, this decrease is found to be not significant statistically. Findings also suggest statistically significant and negative effect of size and tangibility on the profitability. However, leverage is positively and significantly related to profitability. The study also proposes that liquidity and growth are positively but not significantly related to the profitability. Keywords: 2008 Global Financial Crisis, US Non-Financial Firms, Profitability, Determinants of Profitability