Optimal Cut-Off Points for Multiple Causes of Business Failure Models

Alessandra Amendola () and Marialuisa Restaino ()
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Marialuisa Restaino: University of Salerno, Department of Economics and Statistics

A chapter in Mathematical and Statistical Methods for Actuarial Sciences and Finance, 2014, pp 11-15 from Springer

Abstract: Abstract In studies involving bankruptcy prediction models, since the attention is focused on the classification of firms into groups according to their financial status and the prediction of the status for new firms, optimal cutoff points have to be chosen. Some methods have been developed for two-group classification. Until now, there are few references on how to determine optimal thresholds when the groups are more than two. Here, a method based on the optimization of both correct classification rate and expected cost misclassification (ECM) is proposed for determining optimal cutoff points when there are multiple causes of business failure. The proposed procedure has been tested on a real data set.

Keywords: Optimal cut-off points; ECM; k×k confusion table; Business failure (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-05014-0_3

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DOI: 10.1007/978-3-319-05014-0_3

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