Predicting the possibility of bankruptcy for the Companies admitted to the Tehran stock exchange by hybrid approach based on Data Envelopment Analysis and essential components analysis

Subject Areas : International Journal of Data Envelopment Analysis

Mohammad Reza Shahriari ¹ , Peyman Hajizadeh ² , Mohammad Hesam Asoodeh ³

1 - IAU
2 - IAU
3 - IAU

Received: 2022-10-13 Accepted : 2023-01-22 Published : 2023-02-01

Keywords: Stock Market, principal component analysis, Data Envelopment Analysis, Bankruptcy,

Abstract :

The task of forecasting corporate bankruptcy has garnered considerable attention from financial researchers. Given the consequences of a company's financial issues on its stakeholders, devising techniques and models to anticipate bankruptcy and financial instability has always been an appealing field of financial research. Company investors desire the security of their capital and expect a reasonable return commensurate with the risk they undertake. They anticipate being able to predict a company's financial crises ahead of time and safeguard their investment. To meet this need, researchers have conducted extensive research and used various methods and models to evaluate the financial performance of companies and of course predict their bankruptcy, but the point that should be noted is that none of these methods are enough for their own, and they should be used together and of course using the professional judgments of elite experts. Among the methods that have attracted the attention of researchers in the last few years to facilitate the process of financial decisions is the data envelopment analysis method, which of course has had acceptable results. In this research, 52 listed manufacturing companies in the Tehran Stock Exchange were selected considering to available information into three groups: food and pharmaceutical companies, metal, automobile and machinery companies, and chemical and petrochemical companies, out of which, 21 companies (10 bankrupt and 11 healthy) companies were classified in the first group, 18 companies (10 bankrupt and 8 healthy) in the second group and 13 companies in the third group.