Corporate Failure Prediction (Bankruptcy) in Australia: From Zeta to Neural Networks

56 Pages Posted: 21 Feb 2009 Last revised: 24 Mar 2009

See all articles by Pak To Chan

Pak To Chan

The Hong Kong University of Science & Technology

Vic Edwards

University of New South Wales (UNSW); University of New South Wales; Financial Research Network (FIRN)

Gary Manger

University of New South Wales (UNSW) - Australian Defence Force Academy

Hairong Yu

University of New South Wales (UNSW)

Date Written: February 21, 2009

Abstract

Relatively little has been written on corporate failure prediction in Australia as suitable corporate databases have not been available for research to be undertaken. The authors were given access to suitable commercial databases and have experimented with a number of different techniques of analysis including decision tree analysis, linear regression, discriminant analysis and artificial neural networks. They have then built a predictive model using a neural network approach and this has proved to be strongly predictive. Further work is being undertaken with fuzzy neural networks. Anecdotal evidence indicates that market approaches such as KMVTM and CreditMetricsTM work for the top 50 or 70 stocks in Australia but not generally. We have therefore left such analytics for further experiments. The authors welcome comment about alternative approaches that may be suitable.

Keywords: Bankruptcy diagnosis, Discriminant analysis, Neural networks, Corporate distress risk, Financial ratio analysis, Fuzzy logic

JEL Classification: G33, C49, C88

Suggested Citation

Chan, Pak To and Edwards, Vic and Manger, Gary and Yu, Hairong, Corporate Failure Prediction (Bankruptcy) in Australia: From Zeta to Neural Networks (February 21, 2009). Available at SSRN: https://ssrn.com/abstract=1347351 or http://dx.doi.org/10.2139/ssrn.1347351

Pak To Chan (Contact Author)

The Hong Kong University of Science & Technology ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Vic Edwards

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

University of New South Wales ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Gary Manger

University of New South Wales (UNSW) - Australian Defence Force Academy ( email )

Sydney, NSW 2052
Australia

Hairong Yu

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

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