Is It Possible to Make Money on Investing in Companies Manufacturing Solar Components? A Panel Data Approach

Sebastian Tomczak, Anna Skowrońska-Szmer and Jan Jakub Szczygielski
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Anna Skowrońska-Szmer: Department of Operations Research and Business Intelligence, Wrocław University of Science and Technology, 50-370 Wrocław, Poland
Jan Jakub Szczygielski: Department of Finance, Kozminski University, 03-301 Warsaw, Poland

Energies, 2021, vol. 14, issue 12, 1-20

Abstract: In the interests of the environment, many countries set limits on the use of non-renewable energy sources and promote renewable energy sources through policy and legislation. Consequently, the demand for components for renewable energy systems exhibits an upward trend. For this reason, managers, investors, and banks are interested in knowing whether investing in a business associated with the semiconductor and related device manufacturing sector, especially the photovoltaic (PV) systems manufacturers, is worthy of a penny. Using a sample for the period of 2015–2018, we apply a new approach to panel data, extending existing research using Classification Trees with the k-Nearest Neighbor and Altman model. Our aim is to analyze the financial conditions of enterprises to identify key indicators that distinguish companies producing PV system components (labeled “green, G”) from companies that do not manufacture PV components (“red, R”). Our results show that green companies can be distinguished from red companies at classification accuracies of 86% and 90% for CRT and CHAID algorithms in Classification Trees method and 93% for k-Nearest Neighbor method, respectively. Based on the Altman model and the analysis of crucial ratios, we also find that green businesses are characterized by lower financial performance although future ratio values may equal or exceed the values for the red companies if current upward trends are sustained. Therefore, investing in green companies presents a viable alternative.

Keywords: CHAID; CRT algorithm; k-Nearest Neighbors method; manufacturing companies; renewable energy sources; indicators; Classification Trees; Altman model; decision making (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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