Why investments fail if you only rely on financial statements

Why investments fail if you only rely on financial statements

Financial statements are ‘results’. It is not the ‘cause’ of the crisis.

​

■ Intrinsic limitations of financial statements

- Financial statements = lagging indicators that record the results of past events

- According to accounting recognition standards, there is a lag of several months to several years between the actual risk occurrence and the time of disclosure.

- Accounting fraud: Numbers can be intentionally manipulated → Financial statements may be the numbers you want to show.

- Preliminary risks cannot be detected solely through disclosures reported to the Financial Supervisory Service's Electronic Disclosure System (DART).

​

■ The truth that data tells

- RaymondsRisk v1.1 analysis results (data base date: 2026-02-21)

· Analysis of 3,109 companies across all KOSPI and KOSDAQ stocks

· 85.9% of the 276 companies with actual trading suspensions were detected in advance in the high-risk group

· Cohen d analysis: In relational indicators, the difference between normal companies and suspended companies is the largest (d > 0.8)

· Relationship indicators generate abnormal signals earlier than financial soundness indicators

​

■ When financial statements are normal, relational indicators are already warning

- A rapid increase in executive changes → a precursor to the collapse of the internal control structure

- Rapid increase in private CB (convertible bond) issuance → Signal of capital inflow from certain forces

- Rapid dilution of the largest shareholder’s shares → Management rights begin to become unstable

- The pattern was repeatedly confirmed before being designated as a managed item and suspended from trading by the Korea Exchange.

​

■ Conclusion

- Financial statement analysis: Necessary conditions (understanding current status)

- Relational risk analysis: prerequisite (detection of future risks)

- Real investment risk management is possible only when both are combined.

- Investing by only looking at financial statements is like driving while only looking at the rear-view mirror.

​

#Relational Risk #raymondsrisk #raymondsindex #konnectaiFinancial statements are ‘results’. It is not the ‘cause’ of the crisis.

​

■ Intrinsic limitations of financial statements

- Financial statements = lagging indicators that record the results of past events

- According to accounting recognition standards, there is a lag of several months to several years between the actual risk occurrence and the time of disclosure.

- Accounting fraud: Numbers can be intentionally manipulated → Financial statements may be the numbers you want to show.

- Preliminary risks cannot be detected solely through disclosures reported to the Financial Supervisory Service's Electronic Disclosure System (DART).

​

■ The truth that data tells

- RaymondsRisk v1.1 analysis results (data base date: 2026-02-21)

· Analysis of 3,109 companies across all KOSPI and KOSDAQ stocks

· 85.9% of the 276 companies with actual trading suspensions were detected in advance in the high-risk group

· Cohen d analysis: In relational indicators, the difference between normal companies and suspended companies is the largest (d > 0.8)

· Relationship indicators generate abnormal signals earlier than financial soundness indicators

​

■ When financial statements are normal, relational indicators are already warning

- A rapid increase in executive changes → a precursor to the collapse of the internal control structure

- Rapid increase in private CB (convertible bond) issuance → Signal of capital inflow from certain forces

- Rapid dilution of the largest shareholder’s shares → Management rights begin to become unstable

- The pattern was repeatedly confirmed before being designated as a managed item and suspended from trading by the Korea Exchange.

​

■ Conclusion

- Financial statement analysis: Necessary conditions (understanding current status)

- Relational risk analysis: prerequisite (detection of future risks)

- Real investment risk management is possible only when both are combined.

- Investing by only looking at financial statements is like driving while only looking at the rear-view mirror.

​

#relationalrisk #raymondsrisk #raymondsindex #konnectai