Development of financial performance evaluation framework for the Indian construction companies

The construction sector is a major contributor to economic activities in a developing country like India. Hence, it becomes inevitable to continuously monitor performance of the Indian construction companies to take adequate steps for their improvement. This study aims to develop a financial performance evaluation framework (FPEF) for construction companies based on the financial factors derived in the previous study, such as investor return, business efficiency, and operations management. A stratified sampling technique was adopted to select a sample of 100 Indian construction companies based on scope, sub-sectors, age, enlistment at the national stock exchange, and the availability of data of 20 financial ratios for each company in Capitaline database from 2008-17, which translated to a set of 1000 data records. Multi-Attribute Decision Making methods like Shannon-Weaver entropy and Simple Additive Weighting have been used to achieve the objective. As a result, the net financial performance score and performance grade of each company were determined to rank and designate them into five categories for assigning recommendations for improvement. The developed FPEF, including the financial performance equation, will help the concerned stakeholders to take adequate steps for improvement by providing company's financial trends with respect to time without adopting cumbersome methodology.