@muhammadayaz

COMPARISON OF BANKRUPTCY PREDICTION MODELS WITH PUBLIC RECORDS AND FIRMOGRAPHICS

, , and . Computer Science & Information Technology (CS & IT) 8 (3): 97 - 109 (February 2018)

Abstract

Many business operations and strategies rely on bankruptcy prediction. In this paper, we aim to study the impacts of public records and firmographics and predict the bankruptcy in a 12- month-ahead period with using different classification models and adding values to traditionally used financial ratios. Univariate analysis shows the statistical association and significance of public records and firmographics indicators with the bankruptcy. Further, seven statistical models and machine learning methods were developed, including Logistic Regression, Decision Tree, Random Forest, Gradient Boosting, Support Vector Machine, Bayesian Network, and Neural Network. The performance of models were evaluated and compared based on classification accuracy, Type I error, Type II error, and ROC curves on the hold-out dataset. Moreover, an experiment was set up to show the importance of oversampling for rare event prediction. The result also shows that Bayesian Network is comparatively more robust than other models without oversampling.

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