The Duration of the Adjustment Process of Financial Ratios

Peles, Yoram C.; Schneller, Meir I.

doi:10.2307/1926912

Cited by 36 publications

(20 citation statements)

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“…Lintner (1956) and for financial ratio analysis by Lev (1969). Subsequently, it has been applied in a range of contexts by Lee and Wu (1988), Peles and Schneller (1989), Davis and Peles (1993), Wu and Ho (1997), Gallizo et al (2002) and Gallizo and Salvador (2003), among others.…”

Section: Introductionmentioning

confidence: 99%

Multivariate partial adjustment of financial ratios: a Bayesian hierarchical approach

Larraz

Gargallo

Salvador

2008

J of Applied Econometrics

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SUMMARYIn this paper we propose a multivariate extension of the partial adjustment model of financial ratios. To that end, we use a dynamic factor model which assumes that financial ratios measuring, essentially, the same economic-financial dimension of the firm evolve in a similar way, reflecting the evolution of the common factor. The proposed model is hierarchical with three levels. The first describes the relationship between each ratio and its common factor; the second describes the evolution of the common factors over time by means of Lev's (1969) partial adjustment model; and the third analyzes the similarity of firms' adjustment coefficients, taking into account their characteristics. The methodology is applied to the analysis of a set of financial ratios related to the business and financial structure of the firm.

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Section: Introductionmentioning

confidence: 99%

Multivariate partial adjustment of financial ratios: a Bayesian hierarchical approach

Larraz

Gargallo

Salvador

2008

J of Applied Econometrics

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“…In this section we analyse the behaviour of a set of financial ratios considered by Davis and Peles [6] and used in the literature on financial ratios (see, the work of Lev [3], Lee and Wu [4], Peles and Schneller [5], Wu and Ho [7], Ho et al [19] and Gallizo and Salvador [9], among others). The ratios employed measure firms' liquidity performance, earnings per share and the capital structure.…”

Section: Analysis Of a Set Of Financial Ratios Taken From The Us Mamentioning

confidence: 99%

“…These ratios measure performance and are influenced by market forces as well as in-firm factors. They approach their target at a rate of change that may be either rapid or slow, reflecting the nature of the market forces involved [5].…”

Section: Analysis Of a Set Of Financial Ratios Taken From The Us Mamentioning

confidence: 99%

“…To that end, we have calculated the similarity matrix (1/S) S s=1 z (s) z (s) . The diagonal elements of this matrix are ones and the out of diagonal elements are the proportion of iterations of the above algorithm where each pair of firms have been assigned to the same component of mixture (5). Using this matrix we have applied several hierarchical agglomerative algorithms using different links (singe, complete and average) and the classifications obtained with a number of groups between the limits of the 95% Bayesian credibility intervals of k (see Table III) have been analysed.…”

Section: Comparative Study Of the Identified Groups Of Firmsmentioning

confidence: 99%

“…GARGALLO, M. SALVADOR AND J. L. GALLIZO is the parameter space for the parameters of mixture (5). constitutes the model space in which the process of birth and death used in the algorithm is developed.…”

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confidence: 99%

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The speed of adjustment of financial ratios: A hierarchical Bayesian approach using mixtures

Gargallo

Salvador

Larraz

2007

Appl Stoch Models Bus & Ind

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SUMMARYThis paper presents a hierarchical Bayesian analysis of the partial adjustment model of financial ratios using mixture models, an approach that allows us to estimate the distribution of the adjustment coefficients. More particularly, it enables us to analyse speed of reaction in the presence of shocks affecting financial ratios objectives as a basis to establish homogenous groups of firms. The proposed methodology is illustrated by examining a set of ratios for a sample of firms operating in the U.S. manufacturing sector.

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Profitability adjustment patterns in international food and consumer products industries

Acheampong¹,

Epperson²,

Park³

et al. 2004

Agribusiness

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The study encompasses an analysis of the variation in speeds of profitability adjustment and accounting bias by developed country and firm size for two important agribusiness industries. Evidence of speeds of profitability adjustment and accounting bias varying by firm size was found in the beverage and tobacco industry and by country in the food and consumer products industry. This suggests that the competitive pressures of integrated international markets are less of a factor in the food and consumer products industry [EconLit citations: L100, L150, L660]. © 2004 Wiley Periodicals, Inc. Agribusiness 20: 31-43, 2004.

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The Duration of the Adjustment Process of Financial Ratios

Cited by 36 publications

References 0 publications

Multivariate partial adjustment of financial ratios: a Bayesian hierarchical approach

Multivariate partial adjustment of financial ratios: a Bayesian hierarchical approach

The speed of adjustment of financial ratios: A hierarchical Bayesian approach using mixtures

Profitability adjustment patterns in international food and consumer products industries

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