# The wave-particle duality of corporate financial metrics

## TL;DR

This paper introduces a new model to analyze financial metrics of Chinese manufacturing firms, showing how both continuous trends and sudden jumps impact corporate performance.

## Contribution

The wave-particle duality model captures both continuous fluctuations and discrete jumps in ROE and ROA, offering a novel framework for financial analysis.

## Key findings

- Financial indicators like ROE and ROA show heavy tails and jumps, rejecting normality assumptions.
- Adding a five-year financial norm improves predictive power, with an adjusted R2 of 0.430.
- ROE jumps are linked to strategic changes, while ROA is influenced by accounting shifts and one-off events.

## Abstract

This study proposes a “wave-particle duality” model for corporate financial indicators, which jointly characterizes the continuous fluctuations and discrete jumps of ROE (Return on Equity) and ROA (Return on Assets) in China’s A-share manufacturing firms. Using a panel of 805 listed manufacturers from 2009 to 2024, we document pronounced heavy tails and jump activity in both indicators; Kolmogorov–Smirnov tests strongly reject the null hypothesis of normality. Discrete-time difference-equation specifications for ROE and ROA further show that linear models relying only on traditional moments (means and standard deviations) together with jump rates are inadequate to capture extreme variation. When we augment the model with the Euclidean norm of each firm’s financial-indicator vector over the preceding five years, the norm is significantly negatively associated with next-year ROE, and the multivariate linear regression yields an adjusted R2 of 0.430. This implies that historical extremes, volatility, and means of first differences carry meaningful explanatory power for subsequent corporate performance. Case-based subgroup analyses indicate that jumps in ROE are largely tied to strategic realignment and industry cycles, whereas ROA is more susceptible to one-off gains and losses and to shifts in accounting policy. Overall, the results provide a unified theoretical framework and empirical evidence to support risk identification and the pursuit of high-quality corporate development.