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Financial Network Analysis on the Performance of Companies Using Integrated Entropy–DEMATEL–TOPSIS Model

Entropy (Basel, Switzerland), 2022-07, Vol.24 (8), p.1056 [Peer Reviewed Journal]

COPYRIGHT 2022 MDPI AG ;2022 by the authors. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (https://creativecommons.org/licenses/by/4.0/). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License. ;2022 by the authors. 2022 ;ISSN: 1099-4300 ;EISSN: 1099-4300 ;DOI: 10.3390/e24081056 ;PMID: 36010720

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  • Title:
    Financial Network Analysis on the Performance of Companies Using Integrated Entropy–DEMATEL–TOPSIS Model
  • Author: Liew, Kah Fai ; Lam, Weng Siew ; Lam, Weng Hoe
  • Subjects: causal relationship ; Decision making ; DEMATEL ; Earnings per share ; Entropy ; financial ratio ; Investment analysis ; Leverage (Finance) ; Management decisions ; Mean ; multi-criteria decision making ; Multiple criterion ; Network analysis ; Performance evaluation ; Portfolio investments ; Project evaluation ; Rankings ; Rate of return ; Ratios ; TOPSIS ; Wealth management
  • Is Part Of: Entropy (Basel, Switzerland), 2022-07, Vol.24 (8), p.1056
  • Description: In this paper, we propose a multi-criteria decision making (MCDM) model by integrating the entropy–DEMATEL with TOPSIS model to analyze the causal relationship of financial ratios towards the financial performance of the companies. The proposed model is illustrated using the financial data of the companies of Dow Jones Industrial Average (DJIA). The financial network analysis using entropy–DEMATEL shows that the financial ratios such as debt to equity ratio (DER) and return on equity (ROE) are classified into the cause criteria group, whereas current ratio (CR), earnings per share (EPS), return on asset (ROA) and debt to assets ratio (DAR) are categorized into the effect criteria group. The top three most influential financial ratios are ROE, CR and DER. The significance of this paper is to determine the causal relationship of financial network towards the financial performance of the companies with the proposed entropy–DEMATEL–TOPSIS model. The ranking identification of the companies in this study is beneficial to the investors to select the companies with good performance in portfolio investment. The proposed model has been applied and validated in the portfolio investment using a mean-variance model based on the selection of companies with good performance. The results show that the proposed model is able to generate higher mean return than the benchmark DJIA index at minimum risk. However, short sale is not allowed for the applicability of the proposed model in portfolio investment.
  • Publisher: Basel: MDPI AG
  • Language: English
  • Identifier: ISSN: 1099-4300
    EISSN: 1099-4300
    DOI: 10.3390/e24081056
    PMID: 36010720
  • Source: DOAJ : Directory of Open Access Journals
    Geneva Foundation Free Medical Journals at publisher websites
    PubMed Central
    Coronavirus Research Database
    ROAD: Directory of Open Access Scholarly Resources
    ProQuest Central
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