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A multicriteria approach for evaluating the performance of industrial firms

Author

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  • Diakoulaki, D
  • Mavrotas, G
  • Papayannakis, L

Abstract

Multivariate techniques have been widely used for the explanation and prediction of the firm's behaviour. However, in practice, the comparative evaluation and ranking of companies is usually based on the consideration of a single measure of corporate success. But the definition of the most appropriate measure gave rise to a considerable debate. This paper tries to utilise the results of a multicriteria analysis, applied to a large sample of Greek pharmaceutical industries, in order to indicate how suitable some common financial ratios are as indices of the firm's overall performance. The results show that profitability constitutes the most representative measure for the differentiation and ranking of companies. Labour productivity and market share are the best indicators of the business' success, while business' failure is more closely related to ratios indicating long- and short-term solvency. This means that a sound capital structure is a necessary but not a sufficient enough condition to ensure the profitable and effective operation of the firm.

Suggested Citation

  • Diakoulaki, D & Mavrotas, G & Papayannakis, L, 1992. "A multicriteria approach for evaluating the performance of industrial firms," Omega, Elsevier, vol. 20(4), pages 467-474, July.
    • Handle: RePEc:eee:jomega:v:20:y:1992:i:4:p:467-474
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    Cited by:

    1. Emel, Ahmet Burak & Oral, Muhittin & Reisman, Arnold & Yolalan, Reha, 2003. "A credit scoring approach for the commercial banking sector," Socio-Economic Planning Sciences, Elsevier, vol. 37(2), pages 103-123, June.
    2. Cliville, Vincent & Berrah, Lamia & Mauris, Gilles, 2007. "Quantitative expression and aggregation of performance measurements based on the MACBETH multi-criteria method," International Journal of Production Economics, Elsevier, vol. 105(1), pages 171-189, January.
    3. Zhang, Faming & Tadikamalla, Pandu R. & Shang, Jennifer, 2016. "Corporate credit-risk evaluation system: Integrating explicit and implicit financial performances," International Journal of Production Economics, Elsevier, vol. 177(C), pages 77-100.
    4. Serhiy Zabolotnyy & Mirosław Wasilewski, 2019. "The Concept of Financial Sustainability Measurement: A Case of Food Companies from Northern Europe," Sustainability, MDPI, vol. 11(18), pages 1-16, September.
    5. Dimitras, A. I. & Zanakis, S. H. & Zopounidis, C., 1996. "A survey of business failures with an emphasis on prediction methods and industrial applications," European Journal of Operational Research, Elsevier, vol. 90(3), pages 487-513, May.
    6. Kao, Chiang & Hung, Hsi-Tai, 2007. "Management performance: An empirical study of the manufacturing companies in Taiwan," Omega, Elsevier, vol. 35(2), pages 152-160, April.
    7. Michał Piasecki & Krystyna Kostyrko, 2020. "Development of Weighting Scheme for Indoor Air Quality Model Using a Multi-Attribute Decision Making Method," Energies, MDPI, vol. 13(12), pages 1-35, June.
    8. Chiang Kao & Hwei-Lan Pao, 2009. "An evaluation of research performance in management of 168 Taiwan universities," Scientometrics, Springer;Akadémiai Kiadó, vol. 78(2), pages 261-277, February.
    9. Psillaki, Maria & Tsolas, Ioannis E. & Margaritis, Dimitris, 2010. "Evaluation of credit risk based on firm performance," European Journal of Operational Research, Elsevier, vol. 201(3), pages 873-881, March.
    10. A. O. Matin & F. Misagh, 2019. "A Modified Mcdm Algorithm With Cumulative Entropy Weights For Selecting The Winner Of The Tender," Strategic decisions and risk management, Real Economy Publishing House, vol. 10(1).
    11. Zopounidis, C., 1999. "Multicriteria decision aid in financial management," European Journal of Operational Research, Elsevier, vol. 119(2), pages 404-415, December.
    12. Jingda Ding & Junping Qiu, 2011. "An approach to improve the indicator weights of scientific and technological competitiveness evaluation of Chinese universities," Scientometrics, Springer;Akadémiai Kiadó, vol. 86(2), pages 285-297, February.
    13. Ioannis Tsolas, 2015. "Firm credit risk evaluation: a series two-stage DEA modeling framework," Annals of Operations Research, Springer, vol. 233(1), pages 483-500, October.
    14. Veronika Kajurova & Dagmar Linnertova, 2018. "The Impact of Loose Monetary Policy on the Competitiveness of Czech Firms," ACTA VSFS, University of Finance and Administration, vol. 12(1), pages 43-73.
    15. Berrah, L. & Mauris, G. & Montmain, J., 2008. "Monitoring the improvement of an overall industrial performance based on a Choquet integral aggregation," Omega, Elsevier, vol. 36(3), pages 340-351, June.

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