In this paper, a method is developed to evaluate firms on the basis of the risks they face. In accordance with the multi-factor method, risk is represented as a vector of sensitivities to unexpected changes of risk factors. Subsequently, the sensitivities themselves are related to firm characteristics. In addition, an application of the method to interfirm comparison is presented. This application is illustrated by a numerical example based on estimates concerning real data. Apart from this application, some other possible future applications are mentioned. Finally, some decision support tools are presented which may enhance the usefulness of the method in practice.

Decision support systems, Performance Evaluation, firm evaluation, interfirm comparison, multi-factor method, risk analysis
ERIM Article Series (EAS)
Annals of Operations Research
Erasmus Research Institute of Management

Vermeulen, E.M, Spronk, J, & van der Wijst, D. (1993). A new approach to firm evaluation. Annals of Operations Research, 45, 387–403. Retrieved from