An investment selection model using multiple discriminant analysis on financial ratios of Philippine listed companies

• Main Author: Cabardo, Margarita P.
• Format: text
• Language: English
• Published: Animo Repository 2000
• Subjects: Investments; Mathematical models; Finance; Discriminant analysis
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/2277
• Institution: De La Salle University

This paper aims to examine whether there are inherent discriminating factors and relationships found in the standard financial analysis tool - the financial ratios, that would discriminate a successful listed company from that of an unsuccessful one.The body of existing literature set against the Philippine context is very limited. Thus, it has been the ambitious goal of the study to contribute to the understanding of the multi-faceted dynamics of Philippine finance. In the process, the contribution is expected to extend towards more practical applications for various sectors: potential investors, data service providers, regulators, listed companies and the general public.The study highlights the use of Discriminant analysis or popularly known as MDA (Multiple Discriminant Analysis), a multivariate statistical process that has the unique quality to capture most number of aspects into one z-score that would differentiate a particular observation from another. Discriminating factors were found in financial ratios subjected to statistical methods, which would differentiate a financially successful publicly listed company from a financially unsuccessful publicly listed company.Several limitations were highlighted during the start of the paper, which will have significant impact on the results, interpretation and application of the resultant model. But despite these conditions, the study continued to estimate a model that could provide a significant and working model that can be used to identify potential financial factors that would suggest an investment choice between two capital assets.