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Analyzing Financial Health of the SMES Listed in the AERO Market of Bucharest Stock Exchange Using Principal Component Analysis

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  • Claudia Diana Sabău-Popa

    (Department of Finance–Accounting, Faculty of Economic Sciences, University of Oradea, 410087 Oradea, Romania)

  • Ramona Simut

    (Department of Economics and Business, Faculty of Economic Sciences, University of Oradea, 410087 Oradea, Romania)

  • Laurențiu Droj

    (Department of Finance–Accounting, Faculty of Economic Sciences, University of Oradea, 410087 Oradea, Romania)

  • Corneliu Cristian Bențe

    (Department of Finance–Accounting, Faculty of Economic Sciences, University of Oradea, 410087 Oradea, Romania)

Abstract

In this paper we aimed to build a composite financial index for measuring the financial health of the companies listed in the AERO (Alternative exchange in Romania) market of the Bucharest Stock Exchange. We used a principal component analysis in order to build this composite financial index using the rates of return, liquidity and the management of 25 companies listed in the AERO market for the period 2011–2018. We conceived this composite indicator as a score function that established according to the numerical values that result from its application when a company was financially healthy, when it had a poor financial health and when it was financially stable. In order to test the financial health of the selected SMEs (small and medium enterprises), we used the one sample t -test under the model of the study and the three classifications of Z (Z < 0—companies with poor financial health, 0 ≤ Z ≤ 0.5—companies with good financial health and Z > 0.5—companies with very good financial health). In this study we also aimed to identify the possible correlations between the solvency rate and the financial health index and between solvency rate and the evolution of some economic and financial measures of the companies’ activities. The results of the regression analysis using panel data showed a positive and statistically significant relation between solvency and the three rates (rates of return, of liquidity and of management, respectively) determined using the analysis of the principal components. The former model of the solvency rate identified correctly 94.9% of the SMEs with poor financial health, 40% of the SMEs with stable financial health and 72.2% of the SMEs with good financial health.

Suggested Citation

  • Claudia Diana Sabău-Popa & Ramona Simut & Laurențiu Droj & Corneliu Cristian Bențe, 2020. "Analyzing Financial Health of the SMES Listed in the AERO Market of Bucharest Stock Exchange Using Principal Component Analysis," Sustainability, MDPI, vol. 12(9), pages 1-15, May.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:9:p:3726-:d:353890
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    References listed on IDEAS

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    2. Hamam, Manal & Spina, Daniela & Selvaggi, Roberta & Vindigni, Gabriella & Pappalardo, Gioacchino & D’Amico, Mario & Chinnici, Gaetano, 2023. "Financial sustainability in agri-food supply chains: A system approach," Economia agro-alimentare / Food Economy, Italian Society of Agri-food Economics/Società Italiana di Economia Agro-Alimentare (SIEA), vol. 25(2), October.
    3. Claudia Diana Sabău-Popa & Luminița Rus & Dana Simona Gherai & Codruța Mare & Ioan Gheorghe Țara, 2021. "Study on Companies from the Energy Sector from the Perspective of Performance through the Operating Cash Flow," Energies, MDPI, vol. 14(12), pages 1-13, June.
    4. Manal Hamam & Daniela Spina & Roberta Selvaggi & Gabriella Vindigni & Gioacchino Pappalardo & Mario D'Amico & Gaetano Chinnici, 2023. "Financial sustainability in agri-food supply chains: A system approach," Economia agro-alimentare, FrancoAngeli Editore, vol. 25(2), pages 135-154.
    5. Emilia Herman & Kinga-Emese Zsido, 2023. "The Financial Sustainability of Retail Food SMEs Based on Financial Equilibrium and Financial Performance," Mathematics, MDPI, vol. 11(15), pages 1-26, August.
    6. Emilia-Zorica Bozga, 2021. "Insights from Companies Research: Sustainability Matters," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 199-206, August.

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