Evaluating the Factors Affecting on Credit Ratings of Accepted Corporates in Tehran Securities Exchange by Using Factor Analysis and AHP

Advances in Mathematical Finance and Applications

مقاله 11، دوره 6، شماره 1، فروردین 2021، صفحه 161-177   

نوع مقاله: Research Paper

شناسه دیجیتال (DOI): 10.22034/amfa.2020.1899553.1421

نویسندگان

Ahmad Mohammaddoost^{* 1}؛ Mir Feiz Falah Shams Dialestani²؛ Madjid Eshaghi Gordji³؛ Ali Ebadian⁴

¹Department of Mathematics, Payame Noor University Tehran, Iran

²Business Faculty, Tehran Central Branch, Islamic Azad University, Tehran, Iran

³Department of Mathematics, Semnan University,, Semnan, Iran.

⁴Department of Mathematics, Urmia University, Urmia, Iran

چکیده

Implementation credit rating for Corporates is influenced by Different circum-stances, systems, processes, and cultures in each country. In this study, we pro-posed a Factor analysis modified approach for determine important factors on real data set of 123 accepted corporate in Tehran Securities Exchange for the years 2009-2017 of diverse range of 52 variable. We estimated the priority score for 49 factors. The three factors, Debt to Equity Ratio, Current debt-to-equity ratio and proprietary ratio exclude due to high correlation with others. The results indicated that three macroeconomic factors: Price Index of Consumer Goods and Services, exchange rate and Interest rate determinants were more effective on the credit ratings. In addition, Financial Ratios and non-Financial Ratios such as Return on equity (ROE), Long-term debt-to-equity ratio, Benefit of the loan, ratio of com-modity to working capital, Current capital turnover, Return on Working Capital, Quick Ratio, Current Ratio, Net Profit margin, Gross profit margin, had effect on credit rating accepted corporate in Tehran Securities Exchange. The Nonparametric statistical test to validate the consistency between AHP ranking and Factor analysis revealed, the new approach has a moderated consistency with AHP. In conclusion, the Factor analysis modified approach could be applied significantly to evaluate efficiency and ranking factors with minimum loss of information.

کلیدواژه‌ها

Credit ratings؛ Factor analysis؛ Analytic hierarchy process؛ Financial ratios؛ Non-financial ratios

مراجع

[1] Ozceylan, E. A Mathematical Model Using AHP Priorities for Soccer Player Selection: A Case Study, South African Journal of Industrial Engineering. 2016, 27(2), P. 190-205, Doi: 10.7166/27-2 -1265.

[2] Ahmadi H, Salahshour Rad M, Nazari M, Nilashi M, Ibrahim O. Evaluating the Factors Affecting the Implementation of Hospital Information System (HIS) Using AHP,Life Science Journal 2014, 11(3), P.202-207.

[3] Jablonsky, J., Measuring the efficiency of production units by AHP models, Mathematical and Computer Modeling, 2007, 46, P. 1091–1098, Doi: 10.1016/j.mcm.2007.03.007.

[4] Mamilla, R., Mehta, M., Shukla, A. and Agarwal, P, A study on economic factors affecting credit ratings of Indian companies. Investment Management and Financial Innovations, 2019, 16(2), P. 326-335, Doi: 10.21511 /imfi.16 (2).2019.27.

[5] Delamaire, L., Implementing a Credit Risk Management System Based on Innovative Scoring Techniques, PhD thesis, The University of Birmingham, Birmingham, UK, 2012.

[6] Conway, J. M, Huffcutt, A. I.A Review and Evaluation of Exploratory Factor Analysis Practice in Organizational Research. Organizational Research Methods, 2003, 6(2), P. 147–168, Doi: 10.1177/109442810325154.

[7] Bartholomew, D., Knott, M., Moustaki, Ir. Latent Variable Models and Factor Analysis: A Unified Approach. 2011, Doi: 10.1002/9781119970583.  

[8] Ghosh, S., Jintanapakanont, J., Identifying and assessing the critical risk factors in an underground rail project in Thailand: a factor analysis approach, International Journal of Project Management, 2004, 22, P. 633–643.Doi: 10.1016/j.ijproman.2004.05.004 

[9] Yong, A, G., Pearce, S., A Beginner’s Guide to Factor Analysis: Focusing on Exploratory Factor Analysis, Tutorials in Quantitative Methods for Psychology, 2013, 9(2), P. 79-94, Doi: 10.20982 /tqmp.092.p079.

[10] Beaver, W.H. Financial Ratios as Predictors of Failure. Journal of Accounting Research, 1966, 4, P. 71-111. Doi: 10.2307/249017 

[11] Altman, E.I. Financial Ratios, Discriminate Analysis and the Prediction of Corporate Bankruptcy. The Journal of Finance, 1968, 23: P.589-609. Doi:10.1111/j.1540-6261.1968.tb00843.x

[12] George E. Pinches Kent A. Mingo, A Multivariate Analysis Of Industrial Bond Ratings, The Journal Of Finance, 1973, 18(1), P. 1-18, Doi:10.1111/j.1540-6261.1973.tb01341.x.

[13] Chen, K ,Shimerda, T, An Empirical Analysis of Useful Financial Ratios. Financial Management - FINAN MANAGE., 1981, 10,P.51-60, Doi: 10.10.2307/3665113.

[14] Keasey, K. and Watson, R. Non-Financial Symptoms and the Prediction of Small Company Failure: A Test of Argent’s Hypotheses. Journal of Business Finance & Accounting, 1987, 14, P. 335-354. Doi:10.1111/j.1468-5957.1987.tb00099.x

[15] Carling, K., Jacobson, T., Lindé, J. and Roszbach, K., Corporate credit risk modeling and the macro economy, Journal of Banking & Finance, 2007, 31(3), P. 845-868,Doi:10.1016/j.jbankfin.2006.06.012.

[16] GUL, S., CHO, H., Capital Structure and Default Risk: Evidence from Korean Stock Market, Journal of Asian Finance, Economics and Business, 2019, 6 (2), P. 15-24, Doi:10.13106/jafeb.2019.vol6.no2.15.

[17] MurciaI, Flávia Cruz de Souza, Dal-Ri Murcia, Fernando, Rover, Suliani, Borba, José Alonso. The determinants of credit rating: Brazilian evidence. BAR - Brazilian Administration Review, 2014, 11(2), P. 188-209. Doi: 10.1590/S1807-76922014000200005

[18] Nuri Aras, O., Öztürk, M., The Effects Of the Macroeconomic Determination Sovereign Credit Rating Of Turkey, Journal of Management, Economics, and Industrial Organization, 2018, 2(2), P.62-75. Doi: 10.31039/ jomeino.2018.2.2.5.

[19] Boumparis, P., Milas, C., Panagiotidis, T., Non-performing loans and sovereign credit ratings, International Review of Financial Analysis, 2019, 64, P. 301-314, ISSN 1057-5219, Doi:10.1016/j.irfa.2019.06.002.

[20] Jens Josephson, Joel Shapiro, Credit ratings and structured finance, Journal of Financial Intermediation, 2020, 41, 100816, Doi:10.1016/j.jfi.2019.03.003.

[21] De Leon, M.,The impact of credit risk and macroeconomic factors on profitability: the case of the ASEAN banks. Banks and Bank Systems, 2020, 15 (1), P. 21- 29. Doi:10.21511/bbs.15(1).2020.03.

[22] Ali, H. F., Charbaji, A. Applying factor analysis to Financial Ratios of international commercial airlines. International Journal of Commerce and Management, 1994, 4(1/2), P. 25-37.Doi: 10.1108/eb047285.

[23] Tan, P. M. S., Koh, H. C., & Low, L. C. Stability of financial ratios: A study of listed companies in Singapore. Asian Review of Accounting, 1997, 5(1), P: 19-39. Doi: 10.1108/eb060680.

[24] Karataş, A. Performance of direct foreign investments in Turkey. Doctoral Dissertation .Boğaziçi University, Istanbul, Turkey.2002

[25] Ugurlu, M., Aksoy, H. Prediction of corporate financial distress in an emerging market: The case of Turkey. Cross Cultural Management: An International Journal, 2006, 13(4), P: 277-295. Doi: 10.1108/ 13527600610713396.

[26] Xuana, V., Thi Phuong Thua, N. and  Tuan Anh, N., Factors affecting the business performance of enterprises: Evidence at Vietnam small and medium-sized enterprises, Management Science Letters , 2020, 10, P. 865–870, Doi: 10.5267/j.msl.2019.10.01 

[27] Ocal, M. E., Oral, E., Erdis, E., Vural, G. Industry financial ratios-application of factor analysis in Turkish construction industry. The Building and Environment, 2007, 2(3), P: 385-392. Doi: 10.1016/j.buildenv .2005.07.023.

[28] Chong, K-Rine and Yap, Ben and Mohamad, Zulkifflee, A Study on the Application of Factor Analysis and the Distributional Properties of Financial Ratios of Malaysian Companies. International Journal of Academic Research in Management (IJARM), 2013, 2(4), P: 83-95.

[29] Al-Magharem, A., Haat, M., Aishah Hashim, H. and Ismail, S., The Impact Of  Ownership Structure And Macroeconomic Factors On Credit Risk: Evidence From Gulf cooperation Council (GCC) Countries, Journal of Sustainability Science and Management , 2020, 15 ( 3), P. 134-148 

[30] Coughlin, Kevin Barry, An Analysis of Factor Extraction Strategies: A Comparison of the Relative Strengths of Principal Axis, Ordinary Least Squares, and Maximum Likelihood in Research Contexts that Include both Categorical and Continuous Variables, Graduate Theses and Dissertations, University of South Florida, USA,2013.

[31] Amerioun, A., Alidadi,A.,Zaboli,R.,Sepandi,M., The data on exploratory factor analysis of factors influencing employees effectiveness for responding to crisis in Iran military hospitals, Data in Brief, 2018,19, P.1522–1529, Doi:10.1016/j.dib.2018.05.117.

[32] Nadimi, R., Shakouri G,H., Factor Analysis (FA) as Ranking and an Efficient Data Reducing Approach for Decision Making Units: SAFA Rolling & Pipe Mills Company Case Study, Applied Mathematical Sciences, 2011, 5(79), P. 3917 – 3927.

[33] Tabachnick, Barbara G., and Linda S. Fidell. Using Multivariate Statistics. Boston: Pearson/Allyn & Bacon, 2007.

[34] Habibi, M., Izanloo, B., Khodaii, I., The Application of Factor Analysis in Weighting of Objects Compared to Constant Weighting Method in Educational Psychological Measurements, Educational Measurement Quarterly, 2012, 9, P. 81-104, (in Persian).

[35] Kishore Datta, S., Singh, K., Variation and Determinants of Financial Inclusion and association with Human Development: A Cross Country Analysis, IIMB Management Review, 2019, Doi:10.1016/j.iimb.2019.07.013.

[36] Liu S, Fu R, Zhou L-H, Chen S-P ,Application of Consensus Scoring and Principal Component Analysis for Virtual Screening against b-Secretase (BACE-1).PLoS ONE, 2012,7(6) ,e38086, Doi: 10.1371/ journal .pone.0038086.

[37] Saaty, T.L, Vargas, L,G Uncertainty and rank order in the analytic hierarchy process, European Journal of Operational Research, 1987, 32(1) ,P. 107-117.

[38] Rosaria de F. S. M. Russoa, Roberto Camanhob, Criteria in AHP: a Systematic Review of Literature, ITQM 2015., Proceeded Computer Science  2015,55, P. 1123 – 1132., Doi: 10.1016/j.procs.2015.07.081.

[39] Shahrokhi, S, Identify the indicators that determine the credit rating of companies, Investment Knowledge Quarterly, 2016, 19, P. 25-51. (in Persian) .

[40] Dianti, Z., Behzadpour, S., Alemi, M,R., HajiMaghsoudi, M., Applying Multi Criteria Decision Making Techniques (Hierarchical Analysis and TOPSIS) in Forecasting the Future of Companies in Tehran Stock Exchange Boards, Journal of Financial Engineering and Securities Management , 2011, 9, P.181-203, (in Persian).

[41] Izadikhah, M., Deriving Weights of Criteria from Inconsistent Fuzzy Comparison Matrices by Using the Nearest Weighted Interval Approximation, Advances in Operations Research, 2012, 574710, P. 1-17, Doi: 10.1155/2012/574710

[42] Soltanifar, M., Introducing a new group hierarchical approach using the preferential voting model, Journal of Operations Research in Its Applications,  2017, 3(54), P.1-13.(in Persian).

[43] Obatay,T., Shiraishiz, S .,Daigo, M. ,Nakajimaz, N., Assessment For An Incomplete Comparison Matrix And Improvement Of An Inconsistent Comparison: Computational Experiments,ISAHP , 1999.

[44] Rahmani, M ,Navidi, H,R., Zamanian, M., A method to improve the incompatibility of the hierarchical analysis process, Daneshvar Raftar Shahed University, 2009, 35, P.83-89. (in Persian).

[45] Mamat, N.J.Z., Daniel, J.K., Statistical analyses on time complexity and rank consistency between singular value decomposition and the duality approach in AHP: A case study of faculty member selection., Mathematical and Computer Modeling, 2007,46, P.1099–1106, Doi:10.1016/j.mcm.2007.03.025.

[46] Benítez, J., Delgado-Galván, X.,  Gutiérrez, J.A., Izquierdo, J., Balancing consistency and expert judgment in AHP, Mathematical and Computer Modeling ,2011, 54, P.1785–1790, Doi:10.1016/j.mcm.2010.12.023.

[47] Gorener, A,. Toker,K,. Ulucay,K,. Application of Combined SWOT and AHP: A Case Study for a Manufacturing Firm, 8th International Strategic Management Conference, 2012, Doi: 10.1016/j.sbspro.2012.09.1139.

[48] Khodaei Valahzagharda, M, Ferdousnejhad, M., Ranking insurance firms using AHP and Factor Analysis, Management Science Letters, 2013, 3, P.937–942, Doi: 10.5267/j.msl.2013.01.027.

[49] Izadikhah, M., Azadi, M., Shokri Kahi, V.,  Farzipoor Saen, R., Developing a new chance constrained NDEA model to measure the performance of humanitarian supply chains, International Journal of Production Research, 2019, 57(3), P. 662-682, Doi: 10.1080/00207543.2018.1480840

[50] Kordrostamia, S., Amirteimoori,A., Masoumzadeh,A., Evaluating the Efficiency of DMUs with PCA and An Application in Real Data Set of Iranian Banks, Int. J. Industrial Mathematics, 2011, 3 (4), P.251-258.