www.ccsenet.org/ijef International Journal of Economics and Finance Vol. 3, No. 5; October 2011 ISSN 1916-971X E-ISSN 1916-9728 76 Discrepancies in Financial Performance between Domestic and Foreign Owned Enterprises: The case of Greece Dionisis Valsamis National and Kapodistrian University of Athens, Department of Economics 5 Stadiou Str., 105 62 Athens Greece Tel: 30-210-368-9353 E-mail: dvalsamis@gmail.com Marina-Selini Katsaiti (Corresponding Author) United Arab Emirates University, Department of Economics and Finance P.O. BOX 17555 Al Ain, UAE Tel: 97-15-0493-5132 E-mail: Selini.katsaiti@uaeu.ac.ae Prof. Panagiotis Petrakis National and Kapodistrian University of Athens, Department of Economics 5 Stadiou Str., 105 62 Athens Greece Tel: 30-210-368-9353 E-mail: ppetrak@econ.uoa.gr Received: February 25, 2011 Accepted: March 23, 2011 doi:10.5539/ijef.v3n5p76 Abstract This study examines whether there are differences between domestic and foreign owned firms operating in Greece, and in particular it focuses on financial management characteristics of the firms under investigation. The data come from the individual companies’ balance sheets for the year 2008. The firms under investigation are grouped into two categories based on the origin of their capital share. Using a non-linear model, we arrive at the following results: foreign enterprises have higher use of capital, manage more financial elements, have more access to long-tern borrowing, while they fall short against domestic firms in short term financing. Finally, foreign firms have higher sales and present greater profitability. Keywords: Financial Management, Investment, Interfirm Comparisons, Financial Performance. Introduction Existing literature has focused on the comparison of performance levels between domestic and foreign owned enterprises. A major study by Buckley and Casson (1976) has shown that: U.S. multinational firms use more research and development International firms achieve greater productivity levels than firms operating in a single country In the UK, international manufacturing firms, were more profitable compared to the British firms (1965 and 1969). The comparative analysis of enterprises has focused on a series of traits such as the magnitude of an enterprise, the salaries paid (Greenway et al., 2000), competition intensity (Nickell, 1996), productivity levels (Keay, 2000, Hall and Jones, 1999), export levels (Cohen, 1973) and technology (Nelson, 1991). Empirical findings report significant discrepancies in the performance levels of domestic and foreign owned enterprises. According to Willmore (1986) it is not surprising that foreign firms achieve higher performance levels when compared to domestic ones, both in developed and developing countries. Among other things, these discrepancies can be attributed to differences in productivity levels, wages, profitability, economic growth, market strategic entry, labor relations, market share, size, innovation and advertising campaign (Bellak, 2001). The question of interest that we attempt to answer in this study is whether there are differences in the capital structure and performance between Greek and foreign owned enterprises. In order to answer this question we focus on differences in four areas: profitability, growth, managerial ability and solvency. The answer to the posed question is of critical importance especially for the future of the Greek economy. After the integration of Greece in the EU and the EMU several crucial changes took place regarding investment and capital movements. In particular, Greek