A comparative analysis of two-stage distress prediction models

The study aimed to investigate the role of non-financial measures in predicting corporate financial distress in the Indian industrial sector. The proportion of independent directors on the board and the proportion of the promoters’ share in the ownership structure of the business were the non-financial measures that were analysed, along with ten financial measures. For this, sample data consisted of 82 companies that had filed for bankruptcy under the Insolvency and Bankruptcy Code (IBC). An equal number of matching financially sound companies also constituted the sample. Therefore, the total sample size was 164 companies. Data for five years immediately preceding the bankruptcy filing was collected for the sample companies. The data of 120 companies evenly drawn from the two groups of companies were used for developing the model and the remaining data were used for validating the developed model. Two binary logistic regression models were developed, M1 and M2, where M1 was formulated with both financial and non-financial variables, and M2 only had financial variables as predictors. The diagnostic ability of the model was tested with the aid of the receiver operating curve (ROC), area under the curve (AUC), sensitivity, specificity and annual accuracy. The results of the study show that inclusion of the two non-financial variables improved the efficacy of the financial distress prediction model. This study made a unique attempt to provide empirical evidence on the role played by non-financial variables in improving the efficiency of corporate distress prediction models.

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Financial Information Asymmetry: Using Deep Learning Algorithms to Predict Financial Distress

Symmetry ◽

10.3390/sym13030443 ◽

2021 ◽

Vol 13 (3) ◽

pp. 443

Author(s):

Chyan-long Jan

Keyword(s):

Neural Networks ◽

Deep Learning ◽

Information Asymmetry ◽

Error Rate ◽

Financial Distress ◽

Prediction Models ◽

High Accuracy ◽

Financial Information ◽

Financial Distress Prediction ◽

Distress Prediction

Because of the financial information asymmetry, the stakeholders usually do not know a company’s real financial condition until financial distress occurs. Financial distress not only influences a company’s operational sustainability and damages the rights and interests of its stakeholders, it may also harm the national economy and society; hence, it is very important to build high-accuracy financial distress prediction models. The purpose of this study is to build high-accuracy and effective financial distress prediction models by two representative deep learning algorithms: Deep neural networks (DNN) and convolutional neural networks (CNN). In addition, important variables are selected by the chi-squared automatic interaction detector (CHAID). In this study, the data of Taiwan’s listed and OTC sample companies are taken from the Taiwan Economic Journal (TEJ) database during the period from 2000 to 2019, including 86 companies in financial distress and 258 not in financial distress, for a total of 344 companies. According to the empirical results, with the important variables selected by CHAID and modeling by CNN, the CHAID-CNN model has the highest financial distress prediction accuracy rate of 94.23%, and the lowest type I error rate and type II error rate, which are 0.96% and 4.81%, respectively.

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Comparative Analysis of Performance Prediction Models for Flexible Pavements

Journal of Transportation Engineering Part B Pavements ◽

10.1061/jpeodx.0000090 ◽

2019 ◽

Vol 145 (1) ◽

pp. 04018062 ◽

Cited By ~ 2

Author(s):

Sung Ho Park ◽

Jae Hoon Kim

Keyword(s):

Comparative Analysis ◽

Performance Prediction ◽

Prediction Models ◽

Flexible Pavements ◽

Analysis Of Performance

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Predicting Corporate Financial Sustainability Using Novel Business Analytics

Sustainability ◽

10.3390/su11010064 ◽

2018 ◽

Vol 11 (1) ◽

pp. 64 ◽

Cited By ~ 5

Author(s):

Kyoung-jae Kim ◽

Kichun Lee ◽

Hyunchul Ahn

Keyword(s):

Financial Distress ◽

Prediction Accuracy ◽

Prediction Models ◽

Support Vector ◽

Model Parameters ◽

Financial Sustainability ◽

Business Analytics ◽

Financial Distress Prediction ◽

Proposed Model ◽

Distress Prediction

Measuring and managing the financial sustainability of the borrowers is crucial to financial institutions for their risk management. As a result, building an effective corporate financial distress prediction model has been an important research topic for a long time. Recently, researchers are exerting themselves to improve the accuracy of financial distress prediction models by applying various business analytics approaches including statistical and artificial intelligence methods. Among them, support vector machines (SVMs) are becoming popular. SVMs require only small training samples and have little possibility of overfitting if model parameters are properly tuned. Nonetheless, SVMs generally show high prediction accuracy since it can deal with complex nonlinear patterns. Despite of these advantages, SVMs are often criticized because their architectural factors are determined by heuristics, such as the parameters of a kernel function and the subsets of appropriate features and instances. In this study, we propose globally optimized SVMs, denoted by GOSVM, a novel hybrid SVM model designed to optimize feature selection, instance selection, and kernel parameters altogether. This study introduces genetic algorithm (GA) in order to simultaneously optimize multiple heterogeneous design factors of SVMs. Our study applies the proposed model to the real-world case for predicting financial distress. Experiments show that the proposed model significantly improves the prediction accuracy of conventional SVMs.

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Understanding the Usage Patterns of Bicycle-Sharing Systems to Predict Users’ Demand: A Case Study in Wenzhou, China

Computational Intelligence and Neuroscience ◽

10.1155/2018/9892134 ◽

2018 ◽

Vol 2018 ◽

pp. 1-21 ◽

Cited By ~ 2

Author(s):

Xiaomei Xu ◽

Zhirui Ye ◽

Jin Li ◽

Mingtao Xu

Keyword(s):

Cluster Analysis ◽

Comparative Analysis ◽

Prediction Models ◽

Transportation Network ◽

Back Propagation ◽

Back Propagation Neural Network ◽

Demand Prediction ◽

Usage Patterns ◽

Accuracy Of Prediction

Bicycle-sharing systems (BSSs) have become a prominent feature of the transportation network in many cities. Along with the boom of BSSs, cities face the challenge of bicycle unavailability and dock shortages. It is essential to conduct rebalancing operations, the success of which largely depend on users’ demand prediction. The objective of this study is to develop users’ demand prediction models based on the rental data, which will serve rebalancing operations. First, methods to collect and process the relevant data are presented. Bicycle usage patterns are then examined from both trip-based aspect and station-based aspect to provide some guidance for users’ demand prediction. After that, the methodology combining cluster analysis, a back-propagation neural network (BPNN), and comparative analysis is proposed to predict users’ demand. Cluster analysis is used to identify different service types of stations, the BPNN method is utilized to establish the demand prediction models for different service types of stations, and comparative analysis is employed to determine if the accuracy of the prediction models is improved by making a distinction among stations and working/nonworking days. Finally, a case study is conducted to evaluate the performance of the proposed methodology. Results indicate that making a distinction among stations and working/nonworking days when predicting users’ demand can improve the accuracy of prediction models.

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