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Financial Performance in Manufacturing Firms: A Comparison Between Parametric and Non-Parametric Approaches

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  • Eleonora Bartoloni
  • Maurizio Baussola

Abstract

This paper provides a methodological analysis of credit risk in manufacturing firms by using two different credit scoring approaches. The first is the traditional discriminant approach for bankruptcy prediction based on a logistic regression model, whereas the second, data envelopment analysis, is a nonparametric approach for measuring firms’ efficiency that does not require ex-ante information on bankrupted firms. By using a manufacturing sample of both healthy and bankrupted firms during the period 2003–09 we provide an in-depth comparison of discriminant analysis and data envelopment analysis and conclude that a correct evaluation of firms’ credit worthiness is the result of successive fine-tuning procedures requiring the use of multiple methodological tools.

Suggested Citation

  • Eleonora Bartoloni & Maurizio Baussola, 2014. "Financial Performance in Manufacturing Firms: A Comparison Between Parametric and Non-Parametric Approaches," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 49(1), pages 32-45, January.
    • Handle: RePEc:pal:buseco:v:49:y:2014:i:1:p:32-45
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    References listed on IDEAS

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    Cited by:

    1. Cefis, Elena & Bartoloni, Eleonora & Bonati, Marco, 2020. "Show me how to live: Firms' financial conditions and innovation during the crisis," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 63-81.

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    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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