The Implementation of Fuzzy Logic to Predict the Bankruptcy of Company in Indonesia

Ednawati Rainarli and Aurelius Aaron
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Ednawati Rainarli: University Of Computer Indonesia, Indonesia
Aurelius Aaron: University Of Computer Indonesia, Indonesia

International Journal of Business and Administrative Studies, 2015, vol. 1, issue 4, 147-154

Abstract: Prediction of bankruptcy of company is generally used to determine the risk of harm caused by inability of debtors in basic payment of its debt, interest rate, or both. In this research, it will be built on fuzzy model to predict bankruptcy of the company based on company’s characteristics in Indonesia. The data used would be obtained from the financial reports of public companies taken from the Indonesian Stock Exchange to do a correlation test. After correlation test would be conducted, it would be found that the financial ratios influence one year prior of bankruptcy and two year prior of bankruptcy. That ratios are used as parameter input of fuzzy model. The output of defuzzification of fuzzy model is a prediction of bankruptcy for each company. After conducted testing, we saw that fuzzy model can predict well the bankruptcy of 65 public companies to the year before bankruptcy and two years before bankruptcy, with the accuracy for each being 81,54% and 83,85%. Based on these results, fuzzy logic can be used as alternative to predict events in the future with a high degree of uncertainty especially for characteristic of the companies’ conditions in Indonesia.

Keywords: Fuzzy Logic; Mamdani Method; Company Predictions of Bankruptcy; Soft Computing (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:apa:ijbaas:2015:p:147-154

DOI: 10.20469/ijbas.1.10003-4

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