Improving performance of corporate rating prediction models by reducing financial ratio heterogeneity

2008 ◽  
Vol 32 (3) ◽  
pp. 434-446 ◽  
Author(s):  
Martin Niemann ◽  
Jan Hendrik Schmidt ◽  
Max Neukirchen
IEEE Access ◽  
2021 ◽  
Vol 9 ◽  
pp. 101197-101206
Author(s):  
Diao Zhou ◽  
Shengnan Hao ◽  
Haiyang Zhang ◽  
Chenxu Dai ◽  
Yongli An ◽  
...  

Author(s):  
Ivana Podhorska ◽  
Maria Misankova

Objective The issue of bankrupt of company is very actual topic not only in Slovakia but also in abroad. The reason is that many companies have problem with the question of their probability of default or bankrupt and also with their financial health as a whole. This paper deals with the issue of prediction models and captures the applicability of these models in the Slovak conditions. Methodology/Technique In this paper are applied eight selected prediction models in the sample of 74 companies from Slovak Republic. In addition, this paper calculated one financial ratio from the category of company´s indebtedness. Based on this calculation is done the comparison between results of predictions models and results of indebtedness financial ratio. Findings They tested eight different prediction models and their findings present that best results were achieved by Fulmer, Poznanski and Zmijewski model. Weak results achieved IN05, CH-index and Sharita model. Novelty : This paper provides explanatory ability and success of individual prediction models in Slovak conditions. Type of Paper: Review Keywords: Prediction Models; Financial Health; Bankrupt; Non-Bankrupt; Indebtedness Financial Ratio.


2021 ◽  
Vol 38 (4) ◽  
pp. 1143-1150
Author(s):  
Veronika ČABINOVÁ ◽  
◽  
Jana BURGEROVÁ ◽  
Peter GALLO ◽  
◽  
...  

The aim of the paper is to propose a suitable structure of the newly designed Financial Health & Prediction (FH&P) rating model, and by putting it into practice in Slovak spa enterprises, to contribute to the development of financial management concepts for spa facilities operating in the field of tourism. The quantification of individual dimensions of the FH&P rating model was based on the calculation of selected ten key financial ratio indicators and prediction models. The values (in different units of measure) were converted to points using compiled transformation tables which formed the final score of the FH&P rating model and subsequently the proposed A-FX rating. Based on the results, Kúpele Bojnice, Inc. (SE03), Špecializovaný liečebný ústav Marína, s.e. (SE21) and Kúpele Nimnica, Inc. (SE07) received the best rating. This innovative model provides financial managers actual, simple and understandable overview of the financial health of a spa company and its future financial perspective. With a several adjustments, the FH&P rating model is easily applicable in any economic sector of Slovakia.


2018 ◽  
Vol 16 (0) ◽  
pp. 13-26
Author(s):  
Natalia Scacun ◽  
Irina Voronova

Authors study the nature of insolvency both from the legal point of view and scientist position as well as updating tendencies of an insolvency of enterprises in recent years. The subject of the study has been selected company’s survival potential that is analyzed with financial ratio analysis using bankruptcy prediction models. Considering research results, authors identify models that are applicable to a particular industry. Authors put primary metal industry (NACE 24) for the study. The aim of the paper is to investigate the survival potential of enterprises by testing existing parametric models of insolvency forecasting and assessing their potential for use in the economic conditions of Latvia. During the investigation has been reviewed the concept of the financially healthy company and its relation with the main success development factors.


Author(s):  
Roberto Kawakami Harrop Galvao ◽  
Victor M. Becerra ◽  
Magda Abou-Seada

Prediction of corporate financial distress is a subject that has attracted the interest of many researchers in finance. The development of prediction models for financial distress started with the seminal work by Altman (1968), who used discriminant analysis. Such a technique is aimed at classifying a firm as bankrupt or nonbankrupt on the basis of the joint information conveyed by several financial ratios.


2018 ◽  
Vol 10 (12) ◽  
pp. 4620 ◽  
Author(s):  
Lei Wang ◽  
Qingjian Zhao ◽  
Zuomin Wen ◽  
Jiaming Qu

Forest fire prevention is important because of human communities near forests or in the wildland-urban interfaces. Short-term forest fire danger rating prediction is an effective way to provide early guidance for forest fire managers. It can therefore effectively protect the forest resources and enhance the sustainability of the forest ecosystem. However, relevant existing forest fire danger rating prediction models operate well only when applied to distinct climates and fuel types separately. There are desires for an effective methodology, which can construct a specific short-term prediction model according to an evaluation of the data from that specific region. Moreover, a suitable method for prediction model construction needs to deal with some big data related computing challenges (i.e., data diversity coupled with complexity of solution space, and the requirement of real-time forest fire prevention application) when massively observed heterogeneous parameters are available for prediction (e.g., meteorology factor, the amount of litter in the area, soil moisture, etc.). To capture the influences of multiple prediction factors on the prediction results and effectively learn from fast cumulative historical big data, artificial intelligence methods are investigated in this paper, yielding a short-term Ratings of Forest Fire Danger Prediction via Multiclass Logistic Regression (or RAFFIA) model for forest fire danger rating online prediction. Experimental evaluations conducted on a sensor-based forest fire prevention experimental station show that RAFFIA (with 98.71% precision and 0.081 root mean square error) is more effective than the Least Square Fitting Regression (LSFR) and Random Forests (RF) prediction models.


2011 ◽  
Vol 8 (1) ◽  
pp. 124 ◽  
Author(s):  
Mai E. Iskandar

This study documents nonstationarity of the bond rating process. The empirical evidence suggests that not only the parameter estimates exhibit nonstationarity but also the bond rating process itself. The source of nonstationarity is found to be externally caused and non agency-specific. Further examination leads us to stipulate that rating agencies apply stricter standards to lower grade issues than to higher grade one when the economy is in a recession. The results have implications for bond investment strategies as well as for the utilization of bond rating prediction models.


2020 ◽  
Vol 54 (2) ◽  
pp. 151-168
Author(s):  
Jinwook Choi ◽  
Yongmoo Suh ◽  
Namchul Jung

PurposeThe purpose of this study is to investigate the effectiveness of qualitative information extracted from firm’s annual report in predicting corporate credit rating. Qualitative information represented by published reports or management interview has been known as an important source in addition to quantitative information represented by financial values in assigning corporate credit rating in practice. Nevertheless, prior studies have room for further research in that they rarely employed qualitative information in developing prediction model of corporate credit rating.Design/methodology/approachThis study adopted three document vectorization methods, Bag-Of-Words (BOW), Word to Vector (Word2Vec) and Document to Vector (Doc2Vec), to transform an unstructured textual data into a numeric vector, so that Machine Learning (ML) algorithms accept it as an input. For the experiments, we used the corpus of Management’s Discussion and Analysis (MD&A) section in 10-K financial reports as well as financial variables and corporate credit rating data.FindingsExperimental results from a series of multi-class classification experiments show the predictive models trained by both financial variables and vectors extracted from MD&A data outperform the benchmark models trained only by traditional financial variables.Originality/valueThis study proposed a new approach for corporate credit rating prediction by using qualitative information extracted from MD&A documents as an input to ML-based prediction models. Also, this research adopted and compared three textual vectorization methods in the domain of corporate credit rating prediction and showed that BOW mostly outperformed Word2Vec and Doc2Vec.


Kybernetes ◽  
2014 ◽  
Vol 43 (7) ◽  
pp. 1098-1113 ◽  
Author(s):  
Hsu-Che Wu ◽  
Ya-Han Hu ◽  
Yen-Hao Huang

Purpose – Credit ratings have become one of the primary references for financial institutions to assess credit risk. Conventional credit rating approaches mainly concentrated on two-class classification (i.e. good or bad credit), which lacks adequate precision to perform credit risk evaluations in practice. In addition, most of previous researches directly focussed on employing various data mining techniques, but rare studies discussed the influence of data preprocessing before classifier construction. The paper aims to discuss these issues. Design/methodology/approach – This study considers nine-class classification (i.e. nine credit risk level) to credit rating prediction. For the development of more accurate classifiers, the paper adopts two-stage analysis, which integrates multiple data preprocessing and supervised learning techniques. Specifically, the first stage applies feature selection, data clustering, and data resampling methods to preprocess the data, and then the second stage utilizes several classification techniques and classifier ensembles to construct prediction models. Findings – The results show that Bagging-DT with data resampling method achieves excellent accuracy (82.96 percent), indicating that the proposed two-stage prediction model is better than conventional one-stage models. Originality/value – Practical implication of this study can lower credit rating expenses and also allow corporations to gain credit rating information instantly.


2019 ◽  
Vol 5 (2) ◽  
pp. 75-88
Author(s):  
M. Shobihin ◽  
Sayekti Suindyah Dwiningwarni ◽  
Supriadi Supriadi

The financial statements serve as a benchmark in assessing the financial performance of the company as the basis for making business decisions. The motivation in conducting this research is to support previous research to see the development condition of one of the oil palm plantation companies. The purpose of this study is to assess the financial performance by using financial ratio analysis and horizontal analysis. The method used in this research is Quantitative Descriptive with analysis design using Term series Analysis. The result of the research based on financial ratio analysis shows the liquidity ratio and solvency ratio in good condition, while the activity ratio and profitability ratio are not good because it is below the industry average of similar companies. Based on horizontal analysis, financial performance fluctuated and influenced internal and external factors such as operational performance and the average price of world palm oil. The limitations of this study are using only two analytical tools and financial statements analyzed only the balance sheet and income statement.


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