Financial distress prediction for listed enterprises using Fuzzy C-Means

Lu Wang

Littera Scripta, 2019, vol. 12, issue 1

Abstract: Enterprise financial distress prediction model is an important tool for enterprise risk management. Fuzzy C-Means (FCM) model is more suitable for the classification calculation in reality because of introducing the fuzzy membership. This article adopts the FCM model to predict financial distress. In the experiment, 90 distressed enterprises and 90 normal enterprises were selected as samples, which are all from the same time and the same industry in Chinese Shenzhen and Shanghai Stock Exchange, and 12 financial indicators of these enterprises as a sample dataset. After the data are pre-processed, we identified 11 financial indicators with a significant difference to make the financial distress prediction. Last, it can be concluded based on the FCM results that the performance is better in the case of distressed enterprises.

Keywords: financial distress prediction; financial indicator; fuzzy C-Means (search for similar items in EconPapers)
Date: 2019
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