FUZZY, DISTRIBUTED, INSTANCE COUNTING, AND DEFAULT ARTMAP NEURAL NETWORKS FOR FINANCIAL DIAGNOSIS

Anatoli Nachev (), Seamus Hill (), Chris Barry () and Borislav Stoyanov ()
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Anatoli Nachev: Business Information Systems, Cairnes School of Business & Economics NUI, Galway, Ireland
Seamus Hill: Business Information Systems, Cairnes School of Business & Economics NUI, Galway, Ireland
Chris Barry: Business Information Systems, Cairnes School of Business & Economics NUI, Galway, Ireland
Borislav Stoyanov: Department of Computer Systems and Technologies, Shumen University, Bulgaria

International Journal of Information Technology & Decision Making (IJITDM), 2010, vol. 09, issue 06, 959-978

Abstract: This paper shows the potential of neural networks based on the Adaptive Resonance Theory as tools that generate warning signals when bankruptcy of a company is expected (bankruptcy prediction problem). Using that class of neural networks is still unexplored to date. We examined four of the most popular networks of the class — fuzzy, distributed, instance counting, and default ARTMAP. In order to illustrate their performance and to compare with other techniques, we used data, financial ratios, and experimental conditions identical to those published in previous studies. Our experiments show that two financial ratios provide highest discriminatory power of the model and ensure best prediction accuracy. We examined performance and validated results by exhaustive search of input variables, cross-validation, receiver operating characteristic analysis, and area under curve metric. We also did application-specific cost analysis. Our results show that distributed ARTMAP outperforms the other three models in general, but the fuzzy model is best performer for certain vigilance values and in the application-specific context. We also found that ARTMAP outperforms the most popular neural networks — multi-layer perceptrons and other statistical techniques applied to the same data.

Keywords: Neural networks; data mining; ARTMAP; bankruptcy prediction (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S0219622010004111

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