European Journal of Operational Research, Vol. 79, No. 2, December 8, 1994, 230-238. doi:10.1016/0377-2217(94)90354-9
It is shown that the comparison of the financial ratios between
firms should be done with extreme caution even when the firms belong
to the same official International Standard Industrial
Classification (ISIC) category. A new measure of financial ratio
closeness is developed in this paper. The homogeneity of each
International Standard Industrial Classification category is
established. This is done by comparing the homogeneity of the actual
classification to a homogenous clustering of the firms based on the
new closeness measure. The empirical results based on all the
Finnish publicly traded firm indicate non-homogeneity of the
industry classification categories in terms of financial ratios.
Keywords: Finance; Performance; Cluster analysis
Roy Dalhstedt
Department of Economics
Helsinki School of Economics and Business Administration
Timo Salmi
Department of Accounting and Business Finance
University of Vaasa
Martti Luoma
Department of Operations Research and Management Science
University of Vaasa
Arto Laakkonen
Kansallis International Bank