Predicting business bankruptcy: a comparative analysis with machine learning models

• Autores: Iparraguirre-Villanueva, Orlando, Cabanillas-Carbonell, Michael
• Formato: artículo
• Fecha de Publicación: 2024
• Institución: Universidad Tecnológica del Perú
• Repositorio: UTP-Institucional
• Lenguaje: inglés
• OAI Identifier: oai:repositorio.utp.edu.pe:20.500.12867/14120
• Enlace del recurso: https://hdl.handle.net/20.500.12867/14120; https://doi.org/10.14445/22315381/IJETT-V72I8P102
• Nivel de acceso: acceso abierto
• Materia: Bankruptcy prediction; Machine learning; Financial risk; Data analysis; https://purl.org/pe-repo/ocde/ford#2.02.04

Business failure prediction has become crucially important for today’s firms, enabling them to reduce financial risks and make informed decisions. This study uses a dataset of 6819 companies and 96 financial and macroeconomic variables to present a comparative analysis of machine learning (ML) models for predicting corporate bankruptcies. Behind this research is to improve the accuracy of bankruptcy prediction, which can help companies make more informed decisions and reduce financial risks. This study aims to evaluate the effectiveness of 16 ML algorithms in terms of accuracy, sensitivity, and other relevant metrics. The work uses methodologies that include data collection and cleaning, exploratory data analysis, model preprocessing and training, and model performance evaluation. Data preprocessing and hyperparameter optimization techniques were used to improve model performance. The evaluated algorithms include classifiers such as Stacking Classifier (SCC), Randomized Search Classifier (RCV), Historical Gradient Boosting Classifier (HGBC), MLP Classifier (MLPC), K-Neighbors Classifier (KNC), Decision Tree Classifier (DTC), XGBRF Classifier (XGBRFC), Support Vector Classifier (SVC), Logistic Regression Classifier (LR), Linear SVC Classifier (LSVC). With an accuracy of 97.63 %, recall of 97.63 %, and F1-score of 97.63 %, the results show that the SCC algorithm was the best. Other models, such as RCV and DTC, also showed good results, with accuracies above 97 %. However, models such as PAC and BNB had lower performance and accuracy below 90 %. Finally, this study compares the results of ML models in predicting business failures and highlights their effectiveness. The SCC algorithm is considered the most suitable model for this task, as it suggests that it can help economic actors make more informed decisions and reduce financial risks in the context of firms.