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

In: Mathematical and Statistical Methods for Actuarial Sciences and Finance

Author

Listed:
  • Alessandra Amendola

    (University of Salerno, Department of Economics and Statistics)

  • Marialuisa Restaino

    (University of Salerno, Department of Economics and Statistics)

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.

Suggested Citation

  • Alessandra Amendola & Marialuisa Restaino, 2014. "Optimal Cut-Off Points for Multiple Causes of Business Failure Models," Springer Books, in: Cira Perna & Marilena Sibillo (ed.), Mathematical and Statistical Methods for Actuarial Sciences and Finance, edition 127, pages 11-15, Springer.
    • Handle: RePEc:spr:sprchp:978-3-319-05014-0_3
    DOI: 10.1007/978-3-319-05014-0_3
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