Financial Leverage, Profitability, and Survival in the Greek Flour Milling Industry

This paper examines how financial leverage relates to profitability among Greek flour milling companies between 2010 and 2024, using an original firm-level panel dataset. The sample is drawn from the balance sheets of 41 Greek flour milling companies. It is enriched with employment, headquarters and founding-year information collected from ICAP CRIF sector studies, together with industry-wide benchmark ratios. Fixed-effects panel estimates show a negative relationship between leverage and return on assets that is both statistically robust and economically meaningful, and that holds up across a wide range of checks, including a three-regime extension of the threshold model. The effect is not uniform: it tends to be larger for firms in the lower part of the profitability distribution, and firms that start the sample period with high leverage face a substantially greater risk of leaving the market. Comparing a balanced and an unbalanced version of the panel shows that a nonlinear specification of the leverage-profitability relationship depends heavily on whether exited firms are included, which points to survivorship bias: the most heavily indebted firms tend to leave the sample before the full extent of their decline can be observed. The results have practical implications for capital-structure decisions in the sector and a methodological lesson for researchers working with small, sector-specific panels.