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The wave-particle duality of corporate financial metrics

Author

Listed:
  • Wen Zhu
  • Junmin Lyu
  • Xiangyuan Li
  • Zhuming Chen

Abstract

This study proposes a “wave-particle duality” model for corporate financial indicators, which jointly characterizes the continuous fluctuations and discrete jumps of ROE (Return on Equity) and ROA (Return on Assets) in China’s A-share manufacturing firms. Using a panel of 805 listed manufacturers from 2009 to 2024, we document pronounced heavy tails and jump activity in both indicators; Kolmogorov–Smirnov tests strongly reject the null hypothesis of normality. Discrete-time difference-equation specifications for ROE and ROA further show that linear models relying only on traditional moments (means and standard deviations) together with jump rates are inadequate to capture extreme variation. When we augment the model with the Euclidean norm of each firm’s financial-indicator vector over the preceding five years, the norm is significantly negatively associated with next-year ROE, and the multivariate linear regression yields an adjusted R2 of 0.430. This implies that historical extremes, volatility, and means of first differences carry meaningful explanatory power for subsequent corporate performance. Case-based subgroup analyses indicate that jumps in ROE are largely tied to strategic realignment and industry cycles, whereas ROA is more susceptible to one-off gains and losses and to shifts in accounting policy. Overall, the results provide a unified theoretical framework and empirical evidence to support risk identification and the pursuit of high-quality corporate development.

Suggested Citation

  • Wen Zhu & Junmin Lyu & Xiangyuan Li & Zhuming Chen, 2025. "The wave-particle duality of corporate financial metrics," PLOS ONE, Public Library of Science, vol. 20(11), pages 1-21, November.
    • Handle: RePEc:plo:pone00:0336976
    DOI: 10.1371/journal.pone.0336976
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    References listed on IDEAS

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