Feature selection methods and sampling techniques to financial distress prediction for Vietnamese listed companies

Loan Vu, Lien Vu, Nga Nguyen, Phuong Do, Daniel Dao

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)
16 Downloads (Pure)

Abstract

The research is taken to integrate the effects of variable selection approaches, as well as sampling techniques, to the performance of a model to predict the financial distress for companies whose stocks are traded on securities exchanges of Vietnam. A firm is financially distressed when its stocks are delisted as requirement from Vietnam Stock Exchange because of making a loss in 3 consecutive years or having accumulated a loss greater than the company’s equity. There are 12 models, constructed differently in feature selection methods, sampling techniques, and classifiers. The feature selection methods are factor analysis and F-score selection, while 3 sets of data samples are chosen by choice-based method with different percentages of financially distressed firms. In terms of classifying technique, logistic regression together with SVM are used in these models. Data are collected from listed firms in Vietnam from 2009 to 2017 for 1, 2 and 3 years before the announcement of their delisting requirement. The experiment’s results highlight the outperformance of the SVM model with F-score selection method in a data sample containing the highest percentage of non-financially distressed firms.
Original languageEnglish
Pages (from-to)276-290
Number of pages15
JournalInvestment Management and Financial Innovations
Volume16
Issue number1
DOIs
Publication statusPublished - 25 Mar 2019
Externally publishedYes

Bibliographical note

This is an Open Access article, distributed under the terms of the
Creative Commons Attribution 4.0 International license, which permits
unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.

Keywords

  • financial distress prediction
  • feature selection
  • sampling technique
  • logistic regression model
  • Support vector machine (SVM)

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