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An insight into the experimental design for credit risk and corporate bankruptcy prediction systems

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Abstract

Over the last years, it has been observed an increasing interest of the finance and business communities in any application tool related to the prediction of credit and bankruptcy risk, probably due to the need of more robust decision-making systems capable of managing and analyzing complex data. As a result, plentiful techniques have been developed with the aim of producing accurate prediction models that are able to tackle these issues. However, the design of experiments to assess and compare these models has attracted little attention so far, even though it plays an important role in validating and supporting the theoretical evidence of performance. The experimental design should be done carefully for the results to hold significance; otherwise, it might be a potential source of misleading and contradictory conclusions about the benefits of using a particular prediction system. In this work, we review more than 140 papers published in refereed journals within the period 2000–2013, putting the emphasis on the bases of the experimental design in credit scoring and bankruptcy prediction applications. We provide some caveats and guidelines for the usage of databases, data splitting methods, performance evaluation metrics and hypothesis testing procedures in order to converge on a systematic, consistent validation standard.

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Acknowledgements

This work has partially been supported by the Mexican Science and Technology Council (CONACYT-Mexico) through a Postdoctoral Fellowship [223351], the Spanish Ministry of Economy under grant TIN2013-46522-P and the Generalitat Valenciana under grant PROMETEOII/2014/062.

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Authors and Affiliations

  1. Department of Electrical Engineering and Computing, Universidad Autónoma de Ciudad Juárez, 32310, Ciudad Juárez Chihuahua, Mexico

    Vicente García

  2. Department of Business Administration and Marketing, Universitat Jaume I, 12071, Castelló de la Plana, Spain

    Ana I. Marqués

  3. Department of Computer Languages and Systems, Institute of New Imaging Technologies Universitat Jaume I, 12071, Castelló de la Plana, Spain

    J. Salvador Sánchez

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  1. Vicente García
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  2. Ana I. Marqués
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  3. J. Salvador Sánchez
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Correspondence to J. Salvador Sánchez.

Appendix A:: Credit databases

Appendix A:: Credit databases

The databases used in the experiments of the studies here analyzed are presented in Table 8. For each database, we report the number of samples, the number of independent variables and the papers in which it has been employed.

Table 8 Databases used in the papers reviewed
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García, V., Marqués, A.I. & Sánchez, J.S. An insight into the experimental design for credit risk and corporate bankruptcy prediction systems. J Intell Inf Syst 44, 159–189 (2015). https://doi.org/10.1007/s10844-014-0333-4

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