Rating and Ranking Firms with Fuzzy Expert Systems: The Case of Camuzzi

The IUP Journal of Applied Finance, Vol. 15, No. 10, pp. 63-88, November 2009

27 Pages Posted: 7 Nov 2007 Last revised: 15 Nov 2009

Stefano Malagoli

Università degli studi di Modena e Reggio Emilia (UNIMORE)

Carlo Alberto Magni

University of Modena and Reggio Emilia - Department of Economics

Giovanni Mastroleo

Università degli Studi della Calabria

Fabio Buttignon

University of Padua - Department of Economics; University of Padua

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Date Written: June 1, 2007

Abstract

In this paper we present a real-life application of a fuzzy expert system aimed at rating and ranking firms. Unlike standard DCF models, it integrates financial, strategic and business determinants and processes both quantitative and qualitative variables. Twenty-one value drivers are defined, concerning the target firm (strategic assets in place and expected financial performance), the acquisition (synergies, quality of management) and the sector (intensity of competition, entry barriers). Their combination via if-then rules leads to the definition of an output represented by a real number in the interval [0,1]. Such a number expresses the valuegenerating power of the target firm inclusive of synergies with the bidder (Strategic Enterprise Value). The system may be used for rating and ranking firms operating in the same sector. A regression analysis using hostile takeovers multiples may be employed to translate the score into price. The real-life case refers to Camuzzi (a natural gas distributor), acquired by Enel, the Italian ex monopolist of electric energy.

Keywords: Corporate finance, firm, rating, ranking, expert system, fuzzy, evaluation

JEL Classification: G34, G30, G31, G12, C88, C63

Suggested Citation

Malagoli, Stefano and Magni, Carlo Alberto and Mastroleo, Giovanni and Buttignon, Fabio, Rating and Ranking Firms with Fuzzy Expert Systems: The Case of Camuzzi (June 1, 2007). The IUP Journal of Applied Finance, Vol. 15, No. 10, pp. 63-88, November 2009. Available at SSRN: https://ssrn.com/abstract=1027935

Stefano Malagoli

Università degli studi di Modena e Reggio Emilia (UNIMORE) ( email )

Viale A. Allegri 9
Modena 42121

Carlo Alberto Magni (Contact Author)

University of Modena and Reggio Emilia - Department of Economics ( email )

Viale Berengario 51
Modena, Modena 41121
Italy

Giovanni Mastroleo

Università degli Studi della Calabria ( email )

Italy

Fabio Buttignon

University of Padua ( email )

Via 8 Febbraio, 2
Padova, Vicenza 35122
Italy

University of Padua - Department of Economics ( email )

via Del Santo 33
Padova, 35123
Italy

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