• ErttZstprlmetnf I "Epeovct / Operational Research. An lntemational Journal. Vol.1, No3 (2001), pp. 299-314 299 A Combinatorial Multicriteria Approach for Corporate Funding Under Policy Restrictions G. Mavrotas*, D. Diakoulaki and Y. Caloghirou Laboratory of Industrial and Energy Economics, Dpt. of Chemical Engineering National Technical University of Athens, Zographou Campus, 15780 Corresponding author's e-mail: mavrotas@chemeng.ntua.gr Abstract Multiple Criteria Decision Aid methods are increasingly used in financial decision making in order to capture the multifaceted character of modern enterprises activated in a complex and versatile market environment. This paper presents a multicriteria approach for the selection of firms applying for financial support from public funds. Besides the budget constraint, the specific decision situation imposes the consideration of additional policy constraints that pre- vent from directly exploiting rankings provided by a multicriteria method. In such a case the problem solution is to find a set of alternatives satisfying the constraints and at the same time maximising a measure of global performance. The proposed procedure relies on the PROMETHEE V method which belongs to the well-known PROMETHEE family of out- ranking methods and is capable to effectively deal with the problem's nlulticriteria and com- binatorial character. This method is modified in order to avoid any bias in the selection of the optimal set that may arrive because of the apparent contradiction between the rate of resources consumption and the coefficients of the alternatives in the additive objective func- tion. The proposed modification results in a fractional objective function which is linearised by means of a suitable mathematical transformation. Keywords: Multiple criteria, Integer programming, Fractional programming, Project se- lection. 1. Introduction Multiple Criteria Decision Aid (MCDA) methods are widely used in financial de- cision problems such as portfolio selection, loan granting, choice among alter- native projects or investment opportunities, evaluation of the firms' credibility or of failure risk, etc. These decision situations usually fall into one of the three multi- criteria problem formulations as these are defined by Roy [1996], namely tKe choice, ranking and sorting problematic. The selection among firms or projects that apply for financial support from a restricted budget, constitutes a typical ranking problem where the decision- mak- er is called to single out the most attractive alternatives by taking into account d- ifferent aspects of the firms' or projects' efficiency. The decision situation becomes