A METHOD FOR IDENTIFYING THE POSSIBLE CAUSES OF FAILURE IN THE CASE OF SERVICE COMPANIES

Camelia Delcea () and Maria Dascalu ()
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Camelia Delcea: The Bucharest Academy of Economic Studies, Romania
Maria Dascalu: The Bucharest Academy of Economic Studies, Romania

Journal of Doctoral Research in Economics, 2011, vol. 3, issue 3, 48-61

Abstract: The core of our paperwork consists in determining a classification of qualitative and quantitative causes that are influencing service companies’ performance and financial health based on grey systems theory and fuzzy sub-sets. The quantitative causes of firms’ performance are mainly financial causes and can be represented by the financial changes, structural changes and by macroeconomic changes. All of these are objectively measurable. Instead, the qualitative causes are subjectively measurable and in most of the cases they are quantified using some experts’ opinion. For a better representation of reality, we will consider that those values are intervals and not numbers, situated in [0; 1]. In order to reduce the degree of subjectivity, we took advantage of the methods offered by fuzzy systems, mainly in construction of the expertons. Expertons are in fact intervals built using the f-fuzzy sub-set and the opinion of several experts over a certain problem. Furthermore, after constructing the expertons, we use the methods offered by grey systems theory and grey arithmetic to determine the degree of influence of each qualitative and quantitative cause on company’s performance. By classifying the causes and acting on the most important of them, the activity of the analyst can be really improved and the company’s performance will rise. The first part of our paper describes the evolutions of the methods used for establishing the companies’ financial health and some related works regarding the causes that affects it. After that, we focus on the methods offered by grey systems theory, on grey arithmetic, and on the steps that should be done to classify the causes, including also a numerical example. We conclude our paper with some remarks over the role and the utility of the grey systems theory and fuzzy in establishing the service companies’ performance and financial health.

Keywords: Failure; Bankruptcy; Service Companies; Grey systems theory; Fuzzy sub-sets theory; Expertons; Diagnosis (search for similar items in EconPapers)
JEL-codes: C02 (search for similar items in EconPapers)
Date: 2011
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