Firm’s performance forecasting and impact of financial crisis 2008.

Abstract

Forecasting the firm performance based on financial information has been an interesting and challenging problem for investors and managers. The results will help investors set a proper strategy to allocate their wealth and for managers it will help them to set goal and achieve their firm goals and this paper also tried to analysis the impact of financial crisis 2008 on firm performance at industry level and overall impact on across the all industries . . There is a wide range of quantitative forecasting techniques in econometric and Machine learning that have been developed to deal with this problem. There are many parameters to measures firm’s performance like ROE, Sale growth etc. but In this study, we used Return on Assets (ROA) as a proxy to measure firm performance . Based on the financial data from all firms listed on US stock market from 2001 to 2016, we deployed the ordinary least squares(OLS) and Decision tree technique to predict the firms’ ROA. We found that financial year, industry and current year cash flow have significant impact on next year performance but capital structure does not have significant impact in next year performance. Financial crisis 2008 might have significant impact on firm performance. We found there is a significant difference between overall performance of all industries after financial crisis(2009 – 2016) and before financial crisis year (2001 – 2008). Real estate industries performance has significant difference before and after financial crisis 2008 whereas Mortgage Bankers and loan corporation industry and commercial Bank industry have no significant difference