Proceedings

The second section describes the linear combination coefficients. One can notice that
the first principal component (labeled “PC1”) is a linear combination of all four ratios.
Thus, it might reasonably be interpreted as a global financial situation indicator. The
second principal component (labeled “PC2”) has negative loadings for the dividends
per share and it appears to represent an indicator of financial architecture’ descriptors
(without the investors remuneration component).
Table 3. Principal Components Analysis for financial ratios
Number Value Difference Proportion
~ 156 ~
Cumulative
value
Cumulative
proportion
1.00 2.20 1.08 0.55 2.20 0.55
2.00 1.12 0.52 0.28 3.31 0.83
3.00 0.60 0.51 0.15 3.91 0.98
4.00 0.09 --- 0.02 4.00 1.00
Eigenvectors (loadings):
Variable PC 1 PC 2 PC 3 PC 4
Current liquidity ratio =
Total current assets /
Total current liabilities
0.64 0.00 -0.27 -0.72
Quick ratio =
(Cash and short term
investments+ Total receivable, net) /
Total current liabilities 0.64 0.00 -0.33 0.70
Net treasury ratio =
Treasury, net / Total Assets 0.29 0.71 0.63 0.03
Dividends per share 0.30 -0.70 0.65 0.03
Included observations: 59; balanced sample (listwise missing value deletion);
computed using: Spearman rank-order correlations; extracting 4 of 4 possible
components
For an evaluation of the first principal component in its hypostasis of overall indicator
of issuers’ financial situations and dividends policies, we run separate testing
regressions with the indicator against close prices as well as against business
turnovers (Table 4 and 5).
Table 4. Market value of shares and financial situation indicator
Explanatory GMM-DIF GMM-SYS
Close prices(t-1) -0.12*** (0.04) -0.20** (0.09)
Financial situation of issuers 39.40*** (4.07) 42.71*** (11.75)
M1 -1.87 [0.06]
M2 1.23[0.22]
Sargan [0.30]
[0.82]
(Df=12)
(Df=14)
Observations (balanced) 35 48
Standard errors (heteroskedasticity corrected) are in round brackets. The null that each
coefficient is equal to zero is tested using the second-step robust standard
errors.***/**/*- statistically significant, respectively at the 1%, 5%, and 10% level.