New Risk Management Research from University of Presov Discussed (Domain Knowledge Features versus LASSO Features in Predicting Risk of Corporate Bankruptcy-DEA Approach): Insurance – Risk Management

Health Policy and Law Daily

2023 DEC 07 (NewsRx) -- By a News Reporter-Staff News Editor at Health Policy and Law Daily -- Data detailed on risk management have been presented. According to news originating from Presov, Slovakia, by NewsRx correspondents, research stated, “Predicting the risk of corporate bankruptcy is one of the most important challenges for researchers dealing with the issue of financial health evaluation. The risk of corporate bankruptcy is most often assessed with the use of early warning models.”

Funders for this research include Scientific Grant Agency of The Ministry of Education, Science, Research And Sport of The Slovak Republic And The Slovak Academy of Sciences.

Our news correspondents obtained a quote from the research from University of Presov: “The results of these models are significantly influenced by the financial features entering them. The aim of this paper was to select the most suitable financial features for bankruptcy prediction. The research sample consisted of enterprises conducting a business within the Slovak construction industry. The features were selected using the domain knowledge (DK) approach and Least Absolute Shrinkage and Selection Operator (LASSO). The performance of VRS DEA (Variable Returns to Scale Data Envelopment Analysis) models was assessed with the use of accuracy, ROC (Receiver Operating Characteristics) curve, AUC (Area Under the Curve) and Somers’ D. The results show that the DK+DEA model achieved slightly better AUC and Somers’ D compared to the LASSO+DEA model. On the other hand, the LASSO+DEA model shows a smaller deviation in the number of identified businesses on the financial distress frontier.”

According to the news reporters, the research concluded: “The added value of this research is the finding that the application of DK features achieves significant results in predicting businesses’ bankruptcy. The added value for practice is the selection of predictors of bankruptcy for the analyzed sample of enterprises.”

For more information on this research see: Domain Knowledge Features versus LASSO Features in Predicting Risk of Corporate Bankruptcy-DEA Approach. Risks, 2023,11(11):199. (Risks - http://www.mdpi.com/journal/risks). The publisher for Risks is MDPI AG.

A free version of this journal article is available at https://doi.org/10.3390/risks11110199.

Our news editors report that more information may be obtained by contacting Martina Mokrisova, Faculty of Management and Business, University of Presov, Konstantinova 16, 080 01 Presov, Slovakia. Additional authors for this research include Jarmila Horvathova.

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