Number of financial indicators as a factor of multi-criteria analysis via the TOPSIS technique: A municipal case study

Abstract

Multi-criteria analysis is a decision-making and efficiency assessment tool for application in both the private and public sectors. Its application is preceded by the selection of suitable indicators and a homogenous set of variants, as well as suitable methods based on the nature of the input data. The goal of the submitted research is to highlight the importance of selecting suitable indicators using a case study assessment of the financial health of a municipality-more precisely, the efficiency of management of this municipality. Four key indicators, thirty-two homogenous subjects, and one multi-criteria analysis method were identified in this study based on the theoretical foundations of the specific issue. These elements were processed into a total of 14 variants depending on the number of assessed indicators. Then, these results were subjected to statistical verification alongside verification using the Jaccard index. Based on the acquired results, we highlight the need for correct and expert identification of the relevant sets of alternatives (the criteria matrix) and expert discussion, which should precede the selection of the assessed indicators and objectify this selection process as much as possible. Assessment based on a low number of indicators was shown to be insufficient, highly variable, and diverse, and these differences were partially eliminated as the number of assessed indicators increased.