Miklos Virag, Tamas Kristof: Neural networks in bankruptcy prediction - A comparative study on the basis of the first Hungarian bankruptcy model Acta Oeconomica, Vol. 55 (4) pp. 403–425 (2005) (original) (raw)

A neural network model for bankruptcy prediction

1990 IJCNN International Joint …, 1990

One interesting area for the use of neural networks is in event prediction. This study develops a neural network model for prediction of bankruptcy and tests it using financial data from various companies. The same set of data is analyzed using a more traditional method of bankruptcy prediction, multivariate discriminant analysis. A comparison of the predictive abilities of both the neural network and the discriminant analysis method is presented. The results show that neural networks might be applicable to this problem.

Artificial neural networks in bankruptcy prediction: General framework and cross-validation analysis

European Journal of Operational Research, 1999

In this paper, we present a general framework for understanding the role of arti®cial neural networks (ANNs) in bankruptcy prediction. We give a comprehensive review of neural network applications in this area and illustrate the link between neural networks and traditional Bayesian classi®cation theory. The method of cross-validation is used to examine the between-sample variation of neural networks for bankruptcy prediction. Based on a matched sample of 220 ®rms, our ®ndings indicate that neural networks are signi®cantly better than logistic regression models in prediction as well as classi®cation rate estimation. In addition, neural networks are robust to sampling variations in overall classi-®cation performance. Ó

Bankruptcy prediction using neural networks

Decision Support Systems, 1994

Prediction of firm bankruptcies have been extensively studied in accounting, as all stakeholders in a firm have a vested interest in monitoring its financial performance. This paper presents an exploratory study which compares the predictive capabilities for firm bankruptcy of neural networks and classical multivariate discriminant analysis. The predictive accuracy of the two techniques is presented within a comprehensive, statistically sound framework, indicating the value added to the forecasting problem by each technique. The study indicates that neural networks perform significantly better than discriminant analysis at predicting firm bankruptcies. Implications of our results for the accounting professional, neural networks researcher and decision support system builders are highlighted.

The Bankruptcy Prediction by Neural Networks and Logistic Regression

International Journal of Academic Research in Accounting Finance and Management Sciences, 2013

Today, the intensity of industry competition has led many companies going bankrupt and pulling out of race. The early warning against the possibility of bankruptcy enables the managers and investors to take pre-emptive actions when it is necessary. The bankruptcy prediction models reveal the latent problems in financial structures like a warning bell and provide timely feedback to managers and investors as well as other people who benefit from this. The bankruptcy of manufacturing companies in Tehran Stock Exchange Market has been predicted in this study using artificial neural network in this respect. It has been also used the logistic regression to do compare with neural network as well. All information which has been used here is related to time periods from 2001 to 2011 and the bankrupt groups have been selected on the basis of Article 141 of the Commercial Code of Iran. In the years before bankruptcy, the financial management has the chance to predict the probability of bankruptcy by using this model and take necessary actions in this regard since the results derived from the neural network predictions are very consistent with reality. Moreover, this model is more accurate than that of logistic regression in prediction process.

A Comprehensive Review of Corporate Bankruptcy Prediction in Hungary

Journal of Risk and Financial Management 13(35), 2020

The article provides a comprehensive review regarding the theoretical approaches, methodologies and empirical researches of corporate bankruptcy prediction, laying emphasis on the 30-year development history of Hungarian empirical results. In ex-socialist countries corporate bankruptcy prediction became possible more than 20 years later compared to the western countries, however, based on the historical development of corporate bankruptcy prediction after the political system change it can be argued that it has already caught up to the level of international best practice. Throughout the development history of Hungarian bankruptcy prediction, it can be tracked how the initial, small, cross-sectional sample and classic methodology-based bankruptcy prediction has evolved to today's corporate rating systems meeting the requirements of the dynamic, through-the-cycle economic capital calculation models. Contemporary methodological development is characterized by the domination of artificial intelligence, data mining, machine learning, and hybrid modelling. On the basis of empirical results, the article draws several normative proposals how to assemble a bankruptcy prediction database and select the right classification method(s) to accomplish efficient corporate bankruptcy prediction.

Bankruptcy Risk Prediction Models Based on Artificial Neural Networks

2017

The purpose of this research is to study the ability of artificial neural networks to forecast the companies' risk of financial distress. We predicted the bankruptcy risk using the associated financial ratios (overall liquidity ratio and the overall solvency ratio) and two artificial neural network models based on the backpropagation algorithm. The proposed models were implemented and tested using the PyBrain software and have been applied to 55 companies listed on the Bucharest Stock Exchange during 2010-2014. After a total of 19,944 iterations for the learning stage, the two algorithms converged and the errors obtained during the tests reached the fixed target. The empirical results showed that the artificial neural network models are efficient and reliable in detecting the risk of bankruptcy. The artificial neural networks are very useful in economic analysis when the complexity of data makes it difficult to implement functions that proper describe the link between economic variables. The use of the neural networks method for predicting the risk of bankruptcy is less common in Romania. This study intends to fill this gap in the literature and we believe it could be of interest not only for the companies listed on the stock exchange, but also for investors, shareholders and banks.

Neural network performance on the bankruptcy classification problem

Computers & Industrial Engineering, 1993

Due to the recent changes in the world economy and as more firms, large and small, seem to fail now than ever, the bankruptcy classification problem is of increasing importance. Unfortunately, there are no easy-to-use and accurate tools to help make bankruptcy classification decisions. In this study, artificial neural network (ANN) technology is used to predict the going concern of firms based on financial ratios of 300 companies. The results indicate that ANN is as accurate or more accurate as a multiple regression model in predicting bankruptcy in addition to being easier to use and readily adapting to the changing environment.

A “User Friendly” Bankruptcy Prediction Model Using Neural Networks

Accounting and Finance Research, 2014

Belgium has faced an important number of corporate bankruptcies during the last decade. The aim of this paper is to develop a model that predicts bankruptcy using three financial ratios that are simple and easily available, even for small businesses. We used a sample of 3,728 Belgian Small and Medium Enterprises (SME's) including 1,864 businesses having been declared bankrupt between 2002 and 2012 and conducted a neural network analysis. Our results indicate that the neural network methodology based on three financial ratios that are simple and easily available as explanatory variables shows a good classification rate of more or less 80 percent. Results of this study may be of interest for financial institutions and for academics.