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Financial Ratio Classification and Sub-sector Discrimination of Manufacturing Firms Evidence from an Emerging Market


  • Seref Kalayci

    (Suleyman Demirel University)

  • Abdulmecit Karatas

    (Bogazici University)

  • Ali Coskun

    (Bogazici University)

  • Ayhan Kirtas

    (Bogazici University)


This article aims to develop an empirically-based classification of financial ratios for manufacturing firms and to examine whether or not these ratios can be used in differentiating sub-sectors of manufacturing industry. The article involves 160 manufacturing firms which are traded in the emerging Istanbul Stock Exchange (ISE). It covers the period between December 1992 and June 1999, and financial ratios of those companies have been calculated for 14 terms. Factor analysis was applied, both to isolate the independent patterns of financial ratios and to create an empirical classification for them. Factor analysis revealed four common factors, namely profitability, solvency/leverage, liquidity, and activity. The discriminating ability of the independent patterns of the financial ratios has been evaluated by means of the discriminant analysis. The eight sub-sectors of the manufacturing firms were included in the analysis, and it was concluded that those common factors are statistically significant in differentiating the sub-sectors of manufacturing firms of an emerging market.

Suggested Citation

  • Seref Kalayci & Abdulmecit Karatas & Ali Coskun & Ayhan Kirtas, 2005. "Financial Ratio Classification and Sub-sector Discrimination of Manufacturing Firms Evidence from an Emerging Market," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 10(1), pages 103-125, Spring.
  • Handle: RePEc:pep:journl:v:10:y:2005:i:1:p:103-25

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    References listed on IDEAS

    1. Barry, Christopher B. & Muscarella, Chris J. & Peavy, John III & Vetsuypens, Michael R., 1990. "The role of venture capital in the creation of public companies*1: Evidence from the going-public process," Journal of Financial Economics, Elsevier, vol. 27(2), pages 447-471, October.
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    4. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
    5. Gifford, Sharon, 1997. "Limited attention and the role of the venture capitalist," Journal of Business Venturing, Elsevier, vol. 12(6), pages 459-482, November.
    6. Megginson, William L & Weiss, Kathleen A, 1991. " Venture Capitalist Certification in Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(3), pages 879-903, July.
    7. Gompers, Paul A., 1996. "Grandstanding in the venture capital industry," Journal of Financial Economics, Elsevier, vol. 42(1), pages 133-156, September.
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    More about this item


    Manufacturing; Financial Ratios; Emerging Markets;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance


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