Determination of financial failure indicators by gray relational analysis and application of data envelopment analysis and logistic regression analysis in BİST 100 index

Financial failure is very important for the economy of the country along with the businesses. Financial failure is the state of failure to reach its targets, which drives businesses to bankruptcy with the economic problems faced as a result of their failure in business policies and financial decisions. When financial failure is not foreseen and protective measures are not taken, it is inevitable that it will result in bankruptcy. Therefore, the importance of financial failure forecasting models is increasing day by day. The purpose of this study is to determine the indicators that affect the financial situation of businesses by using hierarchical structures of financial indicators. In addition, it is aimed to determine the most applicable method by comparing the performance of non-parametric data envelopment analysis in estimating the financial situation of businesses apart from the traditional statistical methods. Financial failure estimation models have been developed by using logistic regression analysis from traditional statistical methods and data envelopment analysis which is a mathematically based nonparametric method over the financial reports of the companies traded in Borsa İstanbul 100 Index between the years 2014-2016. In the development of these models, the variables included in the model are as important as the method applied. For this reason, the gray relational analysis method has been considered in determining the indicators that affect the financial situation of the businesses. As a result of the analysis, it was determined that the logistic regression model, which is one of the prediction models, has a higher rate of prediction power than the data envelopment analysis in predicting the financial failure of the businesses. However, data envelopment analysis is also an easy and fast method for estimating financial failures and advises businesses on the indicators that they be in need to improve in order to be successful. As a result of the study, it has been found that both methods are feasible in the estimation of financial failure, but the methods have different advantages in themselves.