An empirical examination of financial performance and distress profiles during COVID-19: the case of fishery and food production firms in Vietnam
Abstract
Purpose
Financial ratios are often used to classify firms into different clusters of financial performance. This study aims to classify firms using financial ratios with advanced techniques and identify the transition matrix of firms moving clusters during the COVID-19 period.
Design/methodology/approach
This study uses compositional data (CoDa) analysis based on existing clustering methods with transformed data by weighted logarithms of financial ratios. The data include 66 listed firms in Vietnam’s food and beverage and fishery sectors over a three-year period from 2019 to 2021, including the COVID-19 period.
Findings
These firms can be classified into three clusters of distinctive characteristics, which can serve as benchmarks for solvency and profitability. The results also show the migration from one cluster to another during the COVID-19 pandemic, allowing for the calculation of the transition probability or the transition matrix.
Practical implications
The findings indicate three distinct clusters (good, average and below-average firm performance) that can help financial analysts, accountants, investors and other strategic decision-makers in making informed choices.
Originality/value
Clustering firms with their financial ratios often suffer from various limitations, such as ratio choices, skewed distributions, outliers and redundancy. This study is motivated by a weighted CoDa approach that addresses these issues. This method can be extended to classify firms in multiple sectors or other emerging markets.
Keywords
Acknowledgements
The authors would like to thank the reviewers and the editor for their helpful comments and suggestions which improved the presentation of the paper. Part of this work was completed while the last author was visiting the Vietnam Institute for Advanced Study in Mathematics (VIASM). The author would like to thank the Institute for its hospitality and support. This paper has also benefited from valuable discussions with participants at Vietnamese Economists Annual Meeting, Danang, July 2023, 10th National Mathematical Congress, Danang, August 2023, Vietnam Symposium in Supply Chain Management (VSSCM-2023), Hanoi, October 2023, 4th Annual meeting of Vietnam Applied Statistics Network (VASN), Hanoi, April 2024. Finally, the authors would like to express their gratitude to Christine Thomas-Agnan for proofreading the English text.
Funding: This research is supported by Ministry of Education and Training of Vietnam (Grant number: B2024-NHF-04), the Spanish Ministry of Science and Innovation/AEI/10.13039/501100011033 and by ERDF – A way of making Europe [Grant number PID2021-123833OB-I00], the Department of Research and Universities of the Generalitat de Catalunya [Grant numbers 2021SGR01197 and 2023-CLIMA-00037] and the Spanish Ministry of Health [Grant number CIBERB06/02/1002].
Citation
Dao, B.T.T., Coenders, G., Lai, P.H., Dam, T.T.T. and Trinh, H.T. (2024), "An empirical examination of financial performance and distress profiles during COVID-19: the case of fishery and food production firms in Vietnam", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-09-2023-0509
Publisher
:Emerald Publishing Limited
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