Shiv Financial Distress Index: A Multidimensional Corporate Distress Framework

This working paper presents the Shiv Financial Distress Index (SFDI), a proposed multidimensional framework for assessing corporate financial distress. The SFDI combines nine dimensions of financial stress: debt, cash flow, liquidity, profitability, interest burden, operating performance, growth, earnings quality, and audit and going-concern risk. The study develops the conceptual methodology of the SFDI and applies it to an empirical case study of Reliance Infrastructure. A cross-industry validation pilot using companies from the Indian healthcare sector is also presented to examine the applicability of the framework across different corporate settings. In addition, the study introduces the Shiv Deterioration Index (SDI), which measures changes in financial distress over time, and the Shiv Red-Flag Score (SRFS), which captures key discrete warning signals. The framework is designed to provide an investor-oriented approach to financial risk assessment by combining multiple dimensions that may not be adequately captured by a single financial ratio. The initial component weights used in the study are proposed research weights and are not presented as statistically validated final weights. The study concludes that a multidimensional framework can provide a broader perspective on corporate financial health and may complement conventional financial analysis. However, further historical testing, larger cross-industry datasets, out-of-sample validation, and empirical estimation of component weights are required before the SFDI can be considered a statistically validated predictive model of corporate failure.