scholarly journals Firm's default — new methodological approach and preliminary evidence from Poland

Equilibrium ◽  
2017 ◽  
Vol 12 (4) ◽  
pp. 753-773
Author(s):  
Tomasz Berent ◽  
Bogusław Bławat ◽  
Marek Dietl ◽  
Przemysław Krzyk ◽  
Radosław Rejman
Keyword(s):  
Financial Distress ◽  
Prediction Accuracy ◽  
Predictive Power ◽  
Methodological Approach ◽  
Value Added ◽  
Research Literature ◽  
Support Vector ◽  
Accuracy Measurement ◽  
Accuracy Ratio ◽  
Sampling Procedures

Research background: Bankruptcy literature is populated with scores of (econometric) models ranging from Altman’s Z-score, Ohlson’s O-score, Zmijewski’s probit model to k-nearest neighbors, classification trees, support vector machines, mathematical programming, evolutionary algorithms or neural networks, all designed to predict financial distress with highest precision. We believe corporate default is also an important research topic to be identified with the prediction accuracy only. Despite the wealth of modelling effort, a unified theory of default is yet to be proposed. Purpose of the article: Due to the disagreement both on the definition and hence the timing of default, as well as on the measurement of prediction accuracy, the comparison (of predictive power) of various models can be seriously misleading. The purpose of the article is to argue for the shift in research focus from maximizing accuracy to the analysis of the information capacity of predictors. By doing this, we may yet come closer to understanding default itself. Methods: We critically appraise the bankruptcy research literature for its methodological variety and empirical findings. Default definitions, sampling procedures, in and out-of-sample testing and accuracy measurement are all scrutinized. In an empirical part, we use a double stochastic Poisson process with multi-period prediction horizon and a comprehensive database of some 15,000 Polish non-listed companies to illustrate the merits of our new approach to default modelling. Findings & Value added: In the theoretical part, we call for the construction of a single unified default forecasting platform estimated for the largest dataset of firms possible to allow testing the utility of various sources of micro, mezzo, and macro information. Our preliminary empirical evidence is encouraging. The accuracy ratio amounts to 0.92 for t = 0 and drops to 0.81 two years ahead of default. We point to the pivotal role played by the information on firm’s liquidity (alternatively in profitability) and — in contrast to Altman’s tradition — hardly any contribution to predictive power of other financial ratios. Macro data is shown to be critical. It adds, on average, more than 10 p.p. to accuracy ratio.  In the future, we hope to integrate listed and non-listed firms data into one model, ideally at higher frequency than annual, and include the information on firm's competitiveness position.

scholarly journals Predicting Corporate Financial Sustainability Using Novel Business Analytics

2018 ◽  
Vol 11 (1) ◽  
pp. 64 ◽  
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.

scholarly journals PREDICTING FINANCIAL DISTRESS FOR ROMANIAN COMPANIES

2018 ◽  
Vol 24 (6) ◽  
pp. 2318-2337 ◽  
Author(s):  
Gheorghe Ruxanda ◽  
Cătălina Zamfir ◽  
Andreea Muraru
Keyword(s):  
Financial Distress ◽  
Prediction Accuracy ◽  
Stock Exchange ◽  
Support Vector ◽  
Financial Indicators ◽  
New Approach ◽  
Linear Classifier ◽  
Vector Machines ◽  
Components Analysis ◽  
Bayesian Logistic Regression

Using a moderately large number of financial ratios, we tried to build models for classifying the companies listed on the Bucharest Stock Exchange into low and high risk classes of financial distress. We considered four classification techniques: Support Vector Machines, Decision Trees, Bayesian logistic regression and Fisher linear classifier, out of which the first two proved to have the highest prediction accuracy. Classifiers were trained and tested on randomly drown samples and on four different databases built starting from the initial financial indicators. As the literature related to the topic on Romanian data is very scarce, our study, by using a variety of methods and combining feature selection and principal components analysis, brings a new approach to predicting financial distress for Romanian companies.

On the determinants and prediction of corporate financial distress in India

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sanjay Sehgal ◽  
Ritesh Kumar Mishra ◽  
Florent Deisting ◽  
Rupali Vashisht
Keyword(s):  
Machine Learning ◽  
Prediction Model ◽  
Financial Distress ◽  
Prediction Accuracy ◽  
Prediction Models ◽  
Accounting Information ◽  
Support Vector ◽  
Content Type ◽  
Distress Prediction ◽  
Practical Implications

PurposeThe main aim of the study is to identify some critical microeconomic determinants of financial distress and to design a parsimonious distress prediction model for an emerging economy like India. In doing so, the authors also attempt to compare the forecasting accuracy of alternative distress prediction techniques.Design/methodology/approachIn this study, the authors use two alternatives accounting information-based definitions of financial distress to construct a measure of financial distress. The authors then use the binomial logit model and two other popular machine learning–based models, namely artificial neural network and support vector machine, to compare the distress prediction accuracy rate of these alternative techniques for the Indian corporate sector.FindingsThe study’s empirical results suggest that five financial ratios, namely return on capital employed, cash flows to total liability, asset turnover ratio, fixed assets to total assets, debt to equity ratio and a measure of firm size (log total assets), play a highly significant role in distress prediction. The study’s findings suggest that machine learning-based models, namely support vector machine (SVM) and artificial neural network (ANN), are superior in terms of their prediction accuracy compared to the simple binomial logit model. Results also suggest that one-year-ahead forecasts are relatively better than the two-year-ahead forecasts.Practical implicationsThe findings of the study have some important practical implications for creditors, policymakers, regulators and other stakeholders. First, rather than monitoring and collecting information on a list of predictor variables, only six most important accounting ratios may be monitored to track the transition of a healthy firm into financial distress. Second, our six-factor model can be used to devise a sound early warning system for corporate financial distress. Three, machine learning–based distress prediction models have prediction accuracy superiority over the commonly used time series model in the available literature for distress prediction involving a binary dependent variable.Originality/valueThis study is one of the first comprehensive attempts to investigate and design a parsimonious distress prediction model for the emerging Indian economy which is currently facing high levels of corporate financial distress. Unlike the previous studies, the authors use two different accounting information-based measures of financial distress in order to identify an effective way of measuring financial distress. Some of the determinants of financial distress identified in this study are different from the popular distress prediction models used in the literature. Our distress prediction model can be useful for the other emerging markets for distress prediction.

scholarly journals Combination of Biorthogonal Wavelet Hybrid Kernel OCSVM with Feature Weighted Approach Based on EVA and GRA in Financial Distress Prediction

2014 ◽  
Vol 2014 ◽  
pp. 1-12 ◽  
Author(s):  
Chao Huang ◽  
Fei Gao ◽  
Hongyan Jiang
Keyword(s):  
Kernel Function ◽  
Financial Distress ◽  
Economic Value ◽  
Value Added ◽  
Real Data ◽  
Support Vector ◽  
Biorthogonal Wavelet ◽  
Financial Distress Prediction ◽  
Distress Prediction ◽  
Hybrid Kernel

Financial distress prediction plays an important role in the survival of companies. In this paper, a novel biorthogonal wavelet hybrid kernel function is constructed by combining linear kernel function with biorthogonal wavelet kernel function. Besides, a new feature weighted approach is presented based on economic value added (EVA) and grey relational analysis (GRA). Considering the imbalance between financially distressed companies and normal ones, the feature weighted one-class support vector machine based on biorthogonal wavelet hybrid kernel (BWH-FWOCSVM) is further put forward for financial distress prediction. The empirical study with real data from the listed companies on Growth Enterprise Market (GEM) in China shows that the proposed approach has good performance.

Machine Learning Approach for Predicting Lane-Change Maneuvers using the SHRP2 Naturalistic Driving Study Data

2021 ◽  
pp. 036119812110035
Author(s):  
Anik Das ◽  
Mohamed M. Ahmed
Keyword(s):  
Machine Learning ◽  
Prediction Accuracy ◽  
Machine Learning Algorithms ◽  
Support Vector ◽  
Lane Change ◽  
Adaptive Boosting ◽  
Extreme Gradient Boosting ◽  
Naturalistic Driving Study ◽  
Naturalistic Driving ◽  
Change Prediction

Accurate lane-change prediction information in real time is essential to safely operate Autonomous Vehicles (AVs) on the roadways, especially at the early stage of AVs deployment, where there will be an interaction between AVs and human-driven vehicles. This study proposed reliable lane-change prediction models considering features from vehicle kinematics, machine vision, driver, and roadway geometric characteristics using the trajectory-level SHRP2 Naturalistic Driving Study and Roadway Information Database. Several machine learning algorithms were trained, validated, tested, and comparatively analyzed including, Classification And Regression Trees (CART), Random Forest (RF), eXtreme Gradient Boosting (XGBoost), Adaptive Boosting (AdaBoost), Support Vector Machine (SVM), K Nearest Neighbor (KNN), and Naïve Bayes (NB) based on six different sets of features. In each feature set, relevant features were extracted through a wrapper-based algorithm named Boruta. The results showed that the XGBoost model outperformed all other models in relation to its highest overall prediction accuracy (97%) and F1-score (95.5%) considering all features. However, the highest overall prediction accuracy of 97.3% and F1-score of 95.9% were observed in the XGBoost model based on vehicle kinematics features. Moreover, it was found that XGBoost was the only model that achieved a reliable and balanced prediction performance across all six feature sets. Furthermore, a simplified XGBoost model was developed for each feature set considering the practical implementation of the model. The proposed prediction model could help in trajectory planning for AVs and could be used to develop more reliable advanced driver assistance systems (ADAS) in a cooperative connected and automated vehicle environment.

scholarly journals Assessment for Thermal Conductivity of Frozen Soil Based on Nonlinear Regression and Support Vector Regression Methods

2020 ◽  
Vol 2020 ◽  
pp. 1-12
Author(s):  
Fu-Qing Cui ◽  
Wei Zhang ◽  
Zhi-Yun Liu ◽  
Wei Wang ◽  
Jian-bing Chen ◽  
...  
Keyword(s):  
Thermal Conductivity ◽  
Support Vector Regression ◽  
Nonlinear Regression ◽  
Prediction Accuracy ◽  
Prediction Models ◽  
Frozen Soil ◽  
Support Vector ◽  
Soil Thermal Conductivity ◽  
Fine Grained ◽  
Fine Grained Soil

The comprehensive understanding of the variation law of soil thermal conductivity is the prerequisite of design and construction of engineering applications in permafrost regions. Compared with the unfrozen soil, the specimen preparation and experimental procedures of frozen soil thermal conductivity testing are more complex and challengeable. In this work, considering for essentially multiphase and porous structural characteristic information reflection of unfrozen soil thermal conductivity, prediction models of frozen soil thermal conductivity using nonlinear regression and Support Vector Regression (SVR) methods have been developed. Thermal conductivity of multiple types of soil samples which are sampled from the Qinghai-Tibet Engineering Corridor (QTEC) are tested by the transient plane source (TPS) method. Correlations of thermal conductivity between unfrozen and frozen soil has been analyzed and recognized. Based on the measurement data of unfrozen soil thermal conductivity, the prediction models of frozen soil thermal conductivity for 7 typical soils in the QTEC are proposed. To further facilitate engineering applications, the prediction models of two soil categories (coarse and fine-grained soil) have also been proposed. The results demonstrate that, compared with nonideal prediction accuracy of using water content and dry density as the fitting parameter, the ternary fitting model has a higher thermal conductivity prediction accuracy for 7 types of frozen soils (more than 98% of the soil specimens’ relative error are within 20%). The SVR model can further improve the frozen soil thermal conductivity prediction accuracy and more than 98% of the soil specimens’ relative error are within 15%. For coarse and fine-grained soil categories, the above two models still have reliable prediction accuracy and determine coefficient (R2) ranges from 0.8 to 0.91, which validates the applicability for small sample soils. This study provides feasible prediction models for frozen soil thermal conductivity and guidelines of the thermal design and freeze-thaw damage prevention for engineering structures in cold regions.

scholarly journals Multi-State Load Demand Forecasting Using Hybridized Support Vector Regression Integrated with Optimal Design of Off-Grid Energy Systems—A Metaheuristic Approach

Processes ◽  
2021 ◽  
Vol 9 (7) ◽  
pp. 1166
Author(s):  
Bashir Musa ◽  
Nasser Yimen ◽  
Sani Isah Abba ◽  
Humphrey Hugh Adun ◽  
Mustafa Dagbasi
Keyword(s):  
Support Vector Regression ◽  
Mean Square Error ◽  
Prediction Accuracy ◽  
Demand Forecasting ◽  
Load Forecasting ◽  
Coefficient Of Determination ◽  
Percentage Error ◽  
Support Vector ◽  
Mean Square ◽  
Hybrid Renewable Energy System

The prediction accuracy of support vector regression (SVR) is highly influenced by a kernel function. However, its performance suffers on large datasets, and this could be attributed to the computational limitations of kernel learning. To tackle this problem, this paper combines SVR with the emerging Harris hawks optimization (HHO) and particle swarm optimization (PSO) algorithms to form two hybrid SVR algorithms, SVR-HHO and SVR-PSO. Both the two proposed algorithms and traditional SVR were applied to load forecasting in four different states of Nigeria. The correlation coefficient (R), coefficient of determination (R2), mean square error (MSE), root mean square error (RMSE), and mean absolute percentage error (MAPE) were used as indicators to evaluate the prediction accuracy of the algorithms. The results reveal that there is an increase in performance for both SVR-HHO and SVR-PSO over traditional SVR. SVR-HHO has the highest R2 values of 0.9951, 0.8963, 0.9951, and 0.9313, the lowest MSE values of 0.0002, 0.0070, 0.0002, and 0.0080, and the lowest MAPE values of 0.1311, 0.1452, 0.0599, and 0.1817, respectively, for Kano, Abuja, Niger, and Lagos State. The results of SVR-HHO also prove more advantageous over SVR-PSO in all the states concerning load forecasting skills. This paper also designed a hybrid renewable energy system (HRES) that consists of solar photovoltaic (PV) panels, wind turbines, and batteries. As inputs, the system used solar radiation, temperature, wind speed, and the predicted load demands by SVR-HHO in all the states. The system was optimized by using the PSO algorithm to obtain the optimal configuration of the HRES that will satisfy all constraints at the minimum cost.

Financial Distress Prediction Based on Support Vector Machine with a Modified Kernel Function

2016 ◽  
Vol 25 (3) ◽  
pp. 417-429
Author(s):  
Chong Wu ◽  
Lu Wang ◽  
Zhe Shi
Keyword(s):  
Support Vector Machine ◽  
Kernel Function ◽  
Financial Distress ◽  
Classification Accuracy ◽  
Feature Space ◽  
Support Vector ◽  
Input Space ◽  
Financial Distress Prediction ◽  
Support Vectors ◽  
Distress Prediction

AbstractFor the financial distress prediction model based on support vector machine, there are no theories concerning how to choose a proper kernel function in a data-dependent way. This paper proposes a method of modified kernel function that can availably enhance classification accuracy. We apply an information-geometric method to modifying a kernel that is based on the structure of the Riemannian geometry induced in the input space by the kernel. A conformal transformation of a kernel from input space to higher-dimensional feature space enlarges volume elements locally near support vectors that are situated around the classification boundary and reduce the number of support vectors. This paper takes the Gaussian radial basis function as the internal kernel. Additionally, this paper combines the above method with the theories of standard regularization and non-dimensionalization to construct the new model. In the empirical analysis section, the paper adopts the financial data of Chinese listed companies. It uses five groups of experiments with different parameters to compare the classification accuracy. We can make the conclusion that the model of modified kernel function can effectively reduce the number of support vectors, and improve the classification accuracy.

Shape-restricted support vector machine (SR-SVM): a SVM classifier taking supplementary shape information of input

2021 ◽  
Vol 40 (1) ◽  
pp. 1481-1494
Author(s):  
Geng Deng ◽  
Yaoguo Xie ◽  
Xindong Wang ◽  
Qiang Fu
Keyword(s):  
Support Vector Machine ◽  
Classification Performance ◽  
Research Literature ◽  
Support Vector ◽  
Svm Classifier ◽  
Classification Problems ◽  
Active Set ◽  
Shape Information ◽  
Convex Optimization Problem ◽  
Shape Restrictions

Many classification problems contain shape information from input features, such as monotonic, convex, and concave. In this research, we propose a new classifier, called Shape-Restricted Support Vector Machine (SR-SVM), which takes the component-wise shape information to enhance classification accuracy. There exists vast research literature on monotonic classification covering monotonic or ordinal shapes. Our proposed classifier extends to handle convex and concave types of features, and combinations of these types. While standard SVM uses linear separating hyperplanes, our novel SR-SVM essentially constructs non-parametric and nonlinear separating planes subject to component-wise shape restrictions. We formulate SR-SVM classifier as a convex optimization problem and solve it using an active-set algorithm. The approach applies basis function expansions on the input and effectively utilizes the standard SVM solver. We illustrate our methodology using simulation and real world examples, and show that SR-SVM improves the classification performance with additional shape information of input.

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