An analysis of the financial performance of defense business segments using data envelopment analysis

Journal of Accounting and Public Policy 18 (1999) 287-310

William F. Bowlin

Abstract

This research examines the financial performance of defense-oriented business segments compared to non-defense-business segments for the years 1983±1992. A financial performance measure developed from data envelopment analysis is evaluated both cross-sectionally and longitudinally. The data envelopment analysis is supplemented by, and compared to, traditional financial ratio analysis which provides additional insight into the financial performance of defense-business segments. Generally, the research findings are that the defense-business segments financially outperformed non-defensebusiness segments for most of the years covered by this study. However, defense segments did deteriorate financially relative to the non-defense-business segments during the time period 1983±1989. Then, beginning in 1990 there are indications that the defense segments reversed this trend and are gaining financial strength and making greater contributions to the financial health of their firms. © 1999 Elsevier Science Inc. All rights reserved

Full text download