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Best proxy to determine firm performance using financial ratios: A CHAID approach

The result's identifiers

  • Result code in IS VaVaI

    <a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F70883521%3A28120%2F22%3A63551658" target="_blank" >RIV/70883521:28120/22:63551658 - isvavai.cz</a>

  • Result on the web

    <a href="https://sciendo.com/article/10.2478/revecp-2022-0010" target="_blank" >https://sciendo.com/article/10.2478/revecp-2022-0010</a>

  • DOI - Digital Object Identifier

    <a href="http://dx.doi.org/10.2478/revecp-2022-0010" target="_blank" >10.2478/revecp-2022-0010</a>

Alternative languages

  • Result language

    angličtina

  • Original language name

    Best proxy to determine firm performance using financial ratios: A CHAID approach

  • Original language description

    The main purpose of this study is to investigate the best predictor of firm performance among different proxies. A sample of 287 Czech firms was taken from automobile, construction, and anufacturing sectors. Panel data of the firms was acquired from the Albertina database for the time period from 2016 to 2020. Three different proxies of firm performance, return of assets (RoA), return of equity (RoE), and return of capital employed (RoCE) were used as dependent variables. Including three proxies of firm&apos;s performance, 16 financial ratios were measured based on the previous literature. A machine learning-based decision tree algorithm, Chi-squared Automatic Interaction Detector (CHAID), was deployed to gauge each proxy&apos;s efficacy and examine the best proxy of the firm performance. A partitioning rule of 70:30 was maintained, which implied that 70% of the dataset was used for training and the remaining 30% for testing. The results revealed that return on assets (RoA) was detected to be a robust proxy to predict financial performance among the targeted indicators. The results and the methodology will be useful for policy-makers, stakeholders, academics and managers to take trategic business decisions and forecast financial performance.

  • Czech name

  • Czech description

Classification

  • Type

    J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database

  • CEP classification

  • OECD FORD branch

    50201 - Economic Theory

Result continuities

  • Project

  • Continuities

    S - Specificky vyzkum na vysokych skolach

Others

  • Publication year

    2022

  • Confidentiality

    S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Data specific for result type

  • Name of the periodical

    Národohospodářský obzor - Review of Economic Perspectives

  • ISSN

    1213-2446

  • e-ISSN

    1804-1663

  • Volume of the periodical

    22

  • Issue of the periodical within the volume

    3

  • Country of publishing house

    PL - POLAND

  • Number of pages

    21

  • Pages from-to

    "219 "- 239

  • UT code for WoS article

    000862631900003

  • EID of the result in the Scopus database

    2-s2.0-85139490029