Model for Predicting Financial Performance of Development and Construction Corporations
Publication: Journal of Construction Engineering and Management
Volume 135, Issue 11
Abstract
Performance forecasting is central to aligning an organization’s operations with its strategic direction. Despite the panoply of approaches to performance predictions, relatively few published studies address model development of financial performance predictions for the construction industry. By analyzing the preceding relationship between financial and economic variables and financial performance, this paper proposes an innovative approach to predicting firm financial performance. First, hypothesis tests using data for 42 development and construction corporations listed in the construction sector of the Taiwan Stock Exchange between 1997 Q1 and 2006 Q4 uncover useful relationships between financial performance and financial and economic variables. Second, based on these relationships, a three-stage mathematical modeling procedure is used for cross-sectional model estimation, which is subsequently refined to create firm-specific financial performance-forecasting models for four sample firms. The out-of-sample forecasting accuracy is evaluated using mean absolute percentage error (MAPE). The results show that the cross-sectional model explains 78.9% of the variation in the cross-sectional performance data, and the MAPE values in the forecasting models range from 9.54 to 19.69%.
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Acknowledgments
The writer would like to thank the Taiwan National Science Council for financially supporting this research. The writer also thanks anonymous reviewers for their useful comments and suggestions.
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Information & Authors
Information
Published In
Journal of Construction Engineering and Management
Volume 135 • Issue 11 • November 2009
Pages: 1190 - 1200
Copyright
© 2009 ASCE.
History
Received: Jul 24, 2008
Accepted: Apr 28, 2009
Published online: Oct 15, 2009
Published in print: Nov 2009
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