Proposal of an innovative MCDA evaluation methodology: knowledge discovery through rank reversal, standard deviation, and relationship with stock return

Abstract

Financial performance analysis is of vital importance those involved in a business (e.g., shareholders, creditors, partners, and company managers). An accurate and appropriate performance measurement is critical for decision-makers to achieve efficient results. Integrated performance measurement, by its nature, consists of multiple criteria with different levels of importance. Multiple Criteria Decision Analysis (MCDA) methods have become increasingly popular for solving complex problems, especially over the last two decades. There are different evaluation methodologies in the literature for selecting the most appropriate one among over 200 MCDA methods. This study comprehensively analyzed 41 companies traded on the Borsa Istanbul Corporate Governance Index for 10 quarters using SWARA, CRITIC, and SD integrated with eight different MCDA method algorithms to determine the position of Turkey's most transparent companies in terms of financial performance. In this study, we propose "stock returns" as a benchmark in comparing and evaluating MCDA methods. Moreover, we calculate the "rank reversal performance of MCDA methods". Finally, we performed a "standard deviation" analysis to identify the objective and characteristic trends for each method. Interestingly, all these innovative comparison procedures suggest that PROMETHEE II (preference ranking organization method for enrichment of evaluations II) and FUCA (Faire Un Choix Adéquat) are the most suitable MCDA methods. In other words, these methods produce a higher correlation with share price; they have fewer rank reversal problems, the distribution of scores they produce is wider, and the amount of information is higher. Thus, it can be said that these advantages make them preferable. The results show that this innovative methodological procedure based on 'knowledge discovery' is verifiable, robust and efficient when choosing the MCDA method.

Interpreting the Determinants of Sensitivity in MCDM Methods with a New Perspective: An Application on E-Scooter Selection with the PROBID Method

“…Here, the sensitivity analysis of MCDM's final results can be easily observed with the price constant. We can see this approach with a similar logic in the studies of Elma et al [19] and Baydaş et al [20]. In these studies, financial performance was calculated with MCDM, the direction of the share price and parameter change were determined, and the most appropriate MCDM method was determined and recommended.…”

Does the Performance of MCDM Rankings Increase as Sensitivity Decreases? Graphics Card Selection and Pattern Discovery Using the PROBID Method

“…Undoubtedly, dealing with complex decision problems with a single or a few selection criteria creates inefficiency in today's conditions and this is quite harmful. The widely used methodology to choose the best graphics card or the best alternative is MCDM (Multi-Criteria Decision Making) [9][10][11].…”