Predicting financial distress in high-dimensional imbalanced datasets: a multi-heterogeneous self-paced ensemble learning framework

Ruize Gao (), Shaoze Cui (), Yu Wang () and Wei Xu ()
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Ruize Gao: Tsinghua University
Shaoze Cui: Beijing Institute of Technology
Yu Wang: Chongqing University
Wei Xu: Jiangnan University

Financial Innovation, 2025, vol. 11, issue 1, 1-34

Abstract: Abstract Financial distress prediction (FDP) is a critical area of study for researchers, industry stakeholders, and regulatory authorities. However, FDP tasks present several challenges, including high-dimensional datasets, class imbalances, and the complexity of parameter optimization. These issues often hinder the predictive model’s ability to accurately identify companies at high risk of financial distress. To mitigate these challenges, we introduce FinMHSPE—a novel multi-heterogeneous self-paced ensemble (MHSPE) FDP learning framework. The proposed model uses pairwise comparisons of data from multiple time frames combined with the maximum relevance and minimum redundancy method to select an optimal subset of features, effectively resolving the high dimensionality issue. Furthermore, the proposed framework incorporates the MHSPE model to iteratively identify the most informative majority class data samples, effectively addressing the class imbalance issue. To optimize the model’s parameters, we leverage the particle swarm optimization algorithm. The robustness of our proposed model is validated through extensive experiments performed on a financial dataset of Chinese listed companies. The empirical results demonstrate that the proposed model outperforms existing competing models in the field of FDP. Specifically, our FinMHSPE framework achieves the highest performance, achieving an area under the curve (AUC) value of 0.9574, considerably surpassing all existing methods. A comparative analysis of AUC values further reveals that FinMHSPE outperforms state-of-the-art approaches that rely on financial features as inputs. Furthermore, our investigation identifies several valuable features for enhancing FDP model performance, notably those associated with a company’s information and growth potential.

Keywords: Financial distress prediction; Feature selection; Imbalanced data; Ensemble learning; Particle swarm optimization (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1186/s40854-024-00745-w

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