The aim of this paper is to construct a performance evaluation of banks with the stock market taken into consideration.
Grey relation analysis (GRA), a concept borrowed from the study of industry and increasingly applied to commerce, is used to evaluate the relative performance of three major banks in Australia. The purpose of using GRA is to reduce the number of financial indicators by selecting representative indicators from financial statement analysis.
Benchmarking performance indicators are essentially finding the representative indicator from the existing ratios most commonly used in financial analysis to assess business operational performance. The paper compares the GRA results from the financial statement analyses and shows the same result can be obtained.
This paper conducted a review of literature and five‐power analysis to aggregate financial ratios appropriate for the analysis. This method may result in incompleteness in the aggregation of ratios, and requires adjustment when other issues for analysis are involved. Future research could set up a specific model for the preliminary selection of financial ratios with a new to make studies of this kind more complete.
This paper introduced a new approach for performance evaluation – GRA. The major contribution of this paper is the use of GRA methodology to retrieve ratios most commonly used in financial analysis to tackle the problems of sample size and distribution uncertainty. This could avoid the waste of resources due to the uncertainty of relations among the ratios when using them for analysis.
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