IDEAS home Printed from https://ideas.repec.org/a/wly/jforec/v43y2024i3p593-614.html
   My bibliography  Save this article

Class‐imbalanced financial distress prediction with machine learning: Incorporating financial, management, textual, and social responsibility features into index system

Author

Listed:
  • Yinghua Song
  • Minzhe Jiang
  • Shixuan Li
  • Shengzhe Zhao

Abstract

Financial distress prediction (FDP) is centrally imported to reduce potential losses of companies and investors. This paper combines social responsibility indicators with financial, management, and textual indicators to construct a multi‐dimensional FDP index system. To increase prediction accuracy, the difference in the number of samples between special treatment and health companies is actively considered, and the synthetic minority oversampling technique is adopted to deal with class‐imbalanced datasets. Moreover, a feature extraction method based on the genetic algorithm is employed to select features as input of machine learning models for predicting financial distress in Chinese listed companies. Experimental results show that ensemble classifiers are the better choice for predicting financial distress, of which gradient boosting decision tree outperforms other classifiers. Textual indicators play the most significant role in complementing traditional financial indicators of FDP, and their financial distress signals emerge earlier compared with management and social responsibility indicators.

Suggested Citation

  • Yinghua Song & Minzhe Jiang & Shixuan Li & Shengzhe Zhao, 2024. "Class‐imbalanced financial distress prediction with machine learning: Incorporating financial, management, textual, and social responsibility features into index system," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 43(3), pages 593-614, April.
  • Handle: RePEc:wly:jforec:v:43:y:2024:i:3:p:593-614
    DOI: 10.1002/for.3050
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/for.3050
    Download Restriction: no

    File URL: https://libkey.io/10.1002/for.3050?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jforec:v:43:y:2024:i:3:p:593-614. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www3.interscience.wiley.com/cgi-bin/jhome/2966 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.