A quantitative measure of financial resilience of firms: Evidence from Tehran stock exchange

Recent financial crises have strained the performance of different firms and understandably, investors have doubts about making serious investments in the stocks of shaky firms. Measuring the resilience of a firm from a financial standpoint in the face of crises is an important indicator for investors. Logically, investing in firms that have continued to maintain their historically stronger financial resilience is more attractive for investors. In the literature, resilience is defined as anticipating, preparing, responding, and adapting to incremental changes and sudden disruptions to survive and prosper. In this paper, the concept of financial resilience has been studied from various dimensions, and its quantification approaches are examined. The models developed in this paper are for calculating financial resilience in terms of key indicators: value at risk and conditional value at risk. Then, upon comparing these methods, an attempt is made to verify the performance of methods based on the quantitative data of four bankrupt and four nonbankrupt firms listed on the Tehran stock exchange in recent years. The results show the proper performance of the proposed measure in expressing the concept of financial resilience in critical conditions.