An analysis of the ®nancial performance of defense business segments using data envelopment analysis

This research examines the ®nancial performance of defense-oriented business segments compared to non-defense-business segments for the years 1983±1992. A ®nancial 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 ®nancial ratio analysis which provides additional insight into the ®nancial performance of defense-business segments. Generally, the research ®ndings are that the defense-business segments ®nancially outperformed non-defensebusiness segments for most of the years covered by this study. However, defense segments did deteriorate ®nancially 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 ®nancial strength and making greater contributions to the ®nancial health of their ®rms. Ó 1999 Elsevier Science Inc. All