FINANCIAL STRENGTH REVISITED IN A TIME OF SEVERE ECONOMIC RECESSION AND FINANCIAL MARKET TURMOIL

The financial strength of companies has been of interest to academicians, financial managers, potential creditors, and investors for years. The US economy has been in a recession since December 2007, a period of almost two years, and thus far there have been no studies that have addressed the financial characteristics of those firms that maintained the highest positions of financial strength in the present recession when many firms, and very large firms indeed, were being forced into chapter eleven bankruptcy. The purpose of this study is to investigate common financial characteristics that measure risk and return, and thus determine value, for companies designated by Value Line as having the greatest financial strength in their database during this recession. If the companies with the greatest financial strength are found to have a unique financial profile, it will have implications for the abovementioned investors, financial analysts, and financial managers. As in previous studies of this type multiple discriminant analysis is used.