The Finnish Journal of Business Economics 4/1986, 333-356.
Based on empirical data it is shown that intra-industry comparison
of firms' financial ratios generally is an unsound practice. The
overall homogeneity of industry classification with respect to the
central financial ratios of the firms is estimated based on a
measure of financial ratio closeness between firms developed in this
paper. The firms are grouped into homogeneous clusters based on the
closeness measure without having to forfeit any information by
averaging the time-series as in earlier studies. The results
indicate non-homogeneity of industry classification in terms of
financial ratios.
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