Piotroski’s Fscore Under Varying Economic Conditions
Piotroski’s (2000) Fscore has become increasingly important to investment managers and analysts as a simple measure of a company’s financial strength. However how it changes over time, and in particular how it reacts under different economic conditions, has not been considered until now. It is evident from the literature that macroeconomic condition and business cycle affect corporate valuation through affecting stock prices. Macroeconomic conditions also affect corporate liquidity, cash flow, profitability, efficiency, financing and capital structure. Therefore it is highly likely that changing macroeconomic conditions will affect the Fscore by affecting corporate profitability, liquidity and efficiency. We examine the extent to which the Fscore is affected by these macroeconomic changes or shocks. It is important that the Fscore, as a simple and powerful measure of predicting corporate financial strength, should give similar results in any state of the economy so that investors can benefit by using it. We find that macroeconomic conditions have a strong and significant effect on the Fscore; indeed during contractionary episodes they have more effect than firm-level variables. Investors should therefore be cautious in applying the Fscore equally under different macroeconomic conditions
Year of publication: |
[2021]
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Authors: | Anderson, Keith P. ; Chowdhury, Anup ; Uddin, Moshfique |
Publisher: |
[S.l.] : SSRN |
Saved in:
freely available
Extent: | 1 Online-Ressource (63 p) |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 28, 2021 erstellt |
Other identifiers: | 10.2139/ssrn.3875433 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10013220046
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