A Quantitative Measure for Financial Resilience of Firms: Evidence from Tehran Stock Exchange

Document Type : Article

Authors

Department of Industrial Engineering and Management Systems, Amirkabir University of Technology, Tehran, Iran

10.24200/sci.2021.55845.4433

Abstract

Recent financial crises have strained the performance of different firms and it has challenged investors to invest in the stocks of these firms. Measuring the resilience of firms from a financial standpoint in terms of crises is an important indicator for investors. It is logical that investing in firms with higher historical financial resilience is more attractive for investors. In the literature the resilience is defined as the ability of anticipating, preparing, responding and adapting to incremental change and sudden disruptions in order to survive and prosper. In this paper, the concept of financial resilience has been studied from various dimensions and its quantification approaches are examined. The models developed in this paper are for calculating financial resilience in terms of key indicators, Value at Risk (VaR), and Conditional Value at Risk (CoVaR). Then, by comparing each of these methods, it has been tried to verify the methods by applying quantitative data of four bankrupt and four non-bankrupt firms listed on Tehran stock exchange (TSE) in recent years. The results show the proper performance of the proposed measure in expressing the concept of financial resilience in critical conditions.

Keywords