A Financial Performance Measurement Model by Using TOPSIS Approach: Turkish Textile Manufacturing Companies

Abstract

Before the accounting scandals in the U.S. and the global crises, accounting firms and credit agencies mostly fail to warn public, investors and governments etc. For instance: while Enron's management was filling bankruptcy papers some of the accounting firms and rating agencies were still advising their investors to buy Enron shares. Similarly, one week before the collapse of Lehman Brothers several bodies including head of a governmental institution gave insurance about Lehman Brothers. But they were wrong; they fail to assess the performance of the companies or misinformed the public. These and several similar incidents indicate that either these professional accounting bodies fail to assess the financial performance of these companies or they were acting unethically (cooking books, disinformation etc.). Hence one might suggest that source and solution of global crises relies on two main topics: global erosion in business ethics and deficiencies in performance evaluation, rather than plain stimulus incentives: trying to ease liquidity.

Our study is mainly focuses on the second aspect: assessment of financial performance of firms by using TOPSIS approach: is a multiple criterion method that identifies better performed firms from the set of businesses whose financial results are close to ideal numbers and away from the risks.

In this study (TOPSIS) model is applied to textile firms' financial results that are quoted to Ä°MKB (Istanbul stock exchange). Financial performance criterions are classified on five factors and their levels of significance are determined by factor analysis. Implementing of the model is provided us a set of performance scores to obtain ranking score that might be useful for all financial information users such as: academicians, investors and government etc.