Analysis of the F-Score Indicator for Listed Companies from the IT and Video Games Industries

Abstract

Theoretical background: The F-Score is a model based on the scoring method. Its high values indicate solid financial foundations of a given company, and in a simplified way they make it possible to distinguish units that are attractive in terms of selection for the investment portfolio. Since the publication of the original version of this model by Piotroski in 2000, many studies have been carried out to verify its effectiveness in various markets. In the vast majority of cases, their results indicated the advisability of using this model. However, the Polish stock exchange was not often taken into account in this context, therefore, it seems that such a study may provide valuable information for Polish investors.

Purpose of the article: The main premise for undertaking research on the assessment of the effectiveness of the F-Score model was the existence of a small number of studies focusing on the Polish stock market in this area. In addition, the specific selection of companies representing two industries may significantly affect the results of such a study, also providing information about the effectiveness of the F-Score model in relation to selected economic sectors. Therefore, the aim of the study is to verify the effectiveness of the F-Score indicator on the example of companies from the IT and video game industries listed on the Warsaw Stock Exchange (WSE).

Research methods: The main methods used in this analysis are descriptive statistics (arithmetic mean, median, standard deviation, coefficient of variation). They were used to analyze the differentiation of the F-Score values, both between sectors and over time, as well as to assess the effectiveness of the title model (in the form of a comparison of rates of return with financial data for the previous year). The research was based on the financial data of companies listed on the WSE Main Market and NewConnect from the video games and IT industries. The analysis covered the period 2017–2019.

Main findings: Based on the study, the following conclusions were drawn: 1) there is a differentiation of the F-Score values both between the video game and IT industries, and also over time; 2) higher values of the B/M ratio did not affect the higher rates of return on shares in the following year; 3) higher values of the F-Score model influenced higher average rates of return on shares in the following year. Thus, the effectiveness of the F-Score model was confirmed on the basis of companies listed on the WSE. It also indicated the need to take into account the differentiation in terms of industries. These conclusions can be useful in the decision-making process for investors – companies with high F-Score values appear attractive in terms of investments, which can bring potential profits exceeding the benchmark.