Newcastle University Business School

Event Item

Piotroski's Fscore: Does it still work as economic conditions vary?

Date/Time: Wednesday 18 December 2019, 14:30 - 16:00

Venue: Room 4.23, Newcastle University Business School

Abstract:

Piotroski's Fscore has become a popular way of summarising the financial stability of a firm, but until now its components and validity have received surprisingly little academic investigation. We approach the Fscore from a macroeconomic standpoint and test whether it is affected by changing economic conditions and government policy. A range of macroeconomic indicators and monetary and fiscal policy indicators all affect the Fscore, meaning that Fscores reported across different economic conditions are not comparable. However, economic crisis periods do not independently affect it. In robustness checks we find the Fscore's behavior differs between Democratic and Republican Presidents and depending on the age and size of the company. We also find that certain individual Fscore flags are working against others, and suggest modifications to make the Fscore more effective and widely applicable.

Guest speaker: Keith Anderson, University of York