Multi-Dimensional Financial Performance Ranking and Inter-Rank Agreement Analysis Using Kendall’s Coefficient of Concordance (W): Evidence from Selected Cement Companies

Abstract

We require a multi-dimensional framework for Corporate Financial Performance that provides breadth and incorporates perspectives extracted from the multiple dimensions of operational, balance sheet strength for measuring capital gains: corporates. This ranking integrates profitability, liquidity and operational efficiency to provide an overview of the financial strength of selected cement companies. A final rank is assigned to each of those dimensions and a cumulative performance score comes through a summative ranking approach. Rankings within each industry are from high to low based on a composite performance that provides an overall view of financial health.
In other words, Kendall’s Coefficient of Concordance (W) is employed as a non-parametric measure of agreement among rankings to determine if these financial dimensions are complementary in analyzing companies. A value of W = 0.415 would suggest some moderate correlation among the 3 ranking criterions used overall. They were however statistically insignificant at the conventional level as measured by their associated chi-square statistic (17.43) in assuming non-agreement/concurrence to be meaningfully commonplace between measures of profitability, liquidity and efficiency.
The result also underscores the inherently multi-faceted nature of financial performance in capital-intensive areas such as cement. Weak concordance implies that companies who excel on one dimension do not necessarily also excel in other dimensions. The composite valuation model can be used by investors, managers and researchers to use a robust and composite measure of corporate financial health.