The use of discriminant analysis in the assessment of municipal company's financial health

Abstract

Decentralization processes in the CEE countries have stimulated the search for measures of financial health of municipal companies that would be comparable and understandable to a broad range of stakeholders. In this study, we have developed a five-factor discriminant model for assessing municipal company's financial health (M-Score model) using data on 50 Ukrainian companies during 2014-2017. The final test sample consisted of 71 companies operating in Bulgaria, Croatia, Czech Republic, Poland, Romania and Ukraine. Our findings can be summarized as follows. First, the empirical model suggests that the equityassets ratio, the current ratio, and the average accounts receivable turnover have both the highest discriminatory power and the greatest impact on the municipal company's financial health. Secondly, we provide convincing evidence that the municipal company's financial health does not depend on the region, but on the nature of its activity and the purpose of enterprise activity. In particular, water and energy utilities are generally financially unhealthy, and out of 45 socalled necessary enterprises, only 12 are classified as financially healthy. The company's M-Score will help managers, lenders, investors, local authorities, and the public to answer the following questions: Can the company avoid financial default? What is its position at the local level? What is its place in the industry?

Moody’s Ratings Statistical Forecasting for Industrial and Retail Firms

“…Additionally, Du (2003), includes the prediction of rating changes using multi-period logit models. Yakymova and Kuz (2019) use multivariate statistical techniques to forecast the rating levels of municipal bonds. To forecast the long-term rating attributed by Moody's in this sector, a multi-layer perceptron, MLP (12, 7, 1) is proposed, using public data from the balance sheets of 827 companies, replicated over a five-year period, using usual transformation into financial ratios with several additional variables.…”

Application of Multidimensional Statistical Analysis in Tribotechnical Diagnostics of Hydraulic Fluids in Woodworking Equipment

“…Discriminant analysis is one of the more complex and demanding statistical methods used in many sectors, mostly in medicine, economics, chemistry, or sociology [ 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 ]. So far, multidimensional statistical methods have not found a more significant application in the field of tribotechnics.…”

Gravitational and intellectual data analysis to assess the money laundering risk of financial institutions

“…Determination of weighting coefficients for factors. At this stage, the analysis of the principal components is used to calculate the weighting coefficients for integrated assessment of money laundering risk of financial institutions (Arambašić et al, 2020;Yakymova et al, 2019). The practical implementation is carried out using the tools of the statistical package Statistica 10, the procedure Multivariate Exploratory Techniques/Principal Components & Classification Analysis.…”