Transformations  in
Business & Economics

FINANCIAL RISK ASSESSMENT BASED ON AN IMPROVED EFFICACY COEFFICIENT METHOD
Siyu Sun, Wei Wu, Sijian Wu, Hongru Xu, Weicai Pang

ABSTRACT. In this research an improved efficacy coefficient method is proposed for corporate financial risk assessment. Single index coefficient and criterion layer coefficient are used to analyse the source of financial risks. In addition, non-financial indicators are integrated into the method to evaluate financial risks caused by external environmental factors. Analytic hierarchy process and fuzzy method are used to build the improved method. A detailed case study is then conducted to validate the improved method. It is found that the case firm had medium financial risk during the year 2015 and 2018 and low financial risk in other years. The results are validated by surveys of the case firm. It is concluded the improved efficacy coefficient method provides a more accurate and reliable financial risk assessment for firms. At the end of the paper, conclusions and practical implications are outlined.

KEYWORDS:  efficacy coefficient method, financial risk, indicator, evaluation, AHP.

JEL classification:  M40, C30.