Financial ratio proportionality and inter-temporal stability: an empirical analysis

Article Abstract:

A study of 500 firms belonging to six different industries in the UK was undertaken to find out the effectiveness of the use of financial ratio analysis in achieving its desired results. This financial tool was designed to control firm size, a condition that could be satisfied if the ratio's numerator and denominator are proportional. Empirical results gained from this study, however, indicate that no such proportionality has been observed, a fact that should warn users of ratio analysis to exercise caution in the derivation of their conclusions.

Usage, Business enterprises, Ratio analysis

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The effect of corporate divestments on shareholder wealth: the UK experience

Article Abstract:

Corporate sell-offs affect stock market prices. A sell-off occurs when the operating assets of a company is sold for cash or securities. The event-time methodology market model was applied on sample data from 178 voluntary divestments by UK traded companies from 1985 to 1986. The study concluded that investors gain most when a sell-off is declared and that stock prices indicate the economic magnitude of the divestment, but sometimes stockholders may lose from the divestiture.

Investments, Stockholders, Corporate divestiture, Divestiture

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Banker judgement versus formal forecasting models: the case of country risk assessment

Article Abstract:

The accuracy of bankers' judgement of country credit risks is investigated. Results show that bankers are biased against the creditworthiness of less-developed countries. Multivariate statistical models provided more accurate predictions of country credit ratings. However, banker judgements are more accurate than multivariate models when the differential costs of type I and type II errors are considered.

Banking industry, Management, Risk assessment, Developing countries, Credit ratings, Political risk

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