FINANCIAL RATIO ANALYSIS OF THE ELECTRIC POWER INDUSTRY

Toshiyuki Sueyoshi ()
Additional contact information
Toshiyuki Sueyoshi: New Mexico Institute of Mining and Technology, Department of Management 801 Leroy Place, Socorro, NM, 87801-4796, USA

Asia-Pacific Journal of Operational Research (APJOR), 2005, vol. 22, issue 03, 349-376

Abstract: Financial Ratio Analysis is newly proposed to examine the financial performance of the American power/energy industry. The new approach compares the financial performances of 147 non-default firms with those of 24 default firms in the US power/energy market. The proposed approach is a new type of nonparametric discriminant analysis that provides a set of weights of a linear discriminant function, consequently yielding an evaluation score for group membership. Such weight estimates, along with an evaluation score, of the discriminant function provide a total financial evaluation measure, based upon which we can determine the financial performance of the power/energy firms. This empirical study informs that both leverage (debt) and profitability (returns on equity) are important financial factors in terms of avoiding corporate distress or bankruptcy. The empirical results obtained from the American power/energy industry are further extended to the international comparison of other major industrial nations including Japan and the European nations. The international comparison concludes that Japanese electric power firms have enough managerial and financial capabilities even if the American financial standard is hypothetically introduced into the evaluation of their financial performances. However, the empirical results also indicate that the Japanese power industry performs barely above the American standard. Thus, corporate leaders in the Japanese power industry need to pay more serious attention to their corporate finances and financial strategies. Such financial perspective will be increasingly important along with the current deregulation policy of the Japanese government.

Keywords: Corporate disaster; finance; deregulation; electric power industry (search for similar items in EconPapers)
Date: 2005
References: View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0217595905000509
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:apjorx:v:22:y:2005:i:03:n:s0217595905000509

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0217595905000509

Access Statistics for this article

Asia-Pacific Journal of Operational Research (APJOR) is currently edited by Gongyun Zhao

More articles in Asia-Pacific Journal of Operational Research (APJOR) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().