1. Analyzing Financial Health of the SMES Listed in the AERO Market of Bucharest Stock Exchange Using Principal Component Analysis
- Author
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Laurențiu Droj, Ramona Simut, Corneliu Cristian Bențe, and Claudia Diana Sabău-Popa
- Subjects
Index (economics) ,020209 energy ,Geography, Planning and Development ,TJ807-830 ,Accounting ,02 engineering and technology ,010501 environmental sciences ,Management, Monitoring, Policy and Law ,TD194-195 ,01 natural sciences ,Renewable energy sources ,Order (exchange) ,Stock exchange ,small and medium-sized companies ,0202 electrical engineering, electronic engineering, information engineering ,GE1-350 ,financial indicators ,0105 earth and related environmental sciences ,Rate of return ,Solvency ,PCA ,Environmental effects of industries and plants ,Renewable Energy, Sustainability and the Environment ,business.industry ,financial health ,Market liquidity ,financial sustainability ,Environmental sciences ,composite index ,Business ,Small and medium-sized enterprises ,Composite index ,AERO market - 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&ndash, 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&mdash, companies with poor financial health, 0 &le, Z &le, 0.5&mdash, companies with good financial health and Z >, 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&rsquo, 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.
- Published
- 2020
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