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

Journal article

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.

Authors: Vu, LT; Thi Vu, L; Thu Nguyen, N; Thi Thuy Do, P; Dao, DP

• Publication status: Published
• Peer review status: Peer reviewed
• Publisher: Business Perspectives
• Journal: Investment Management and Financial Innovations
• Volume: 16
• Issue: 1
• Pages: 276-290
• Publication date: 2019-03-25
• Acceptance date: 2019-03-12
• DOI: 10.21511/imfi.16(1).2019.22
• EISSN: 1812-9358
• ISSN: 1810-4967
• Language: English
• Keywords: Support Vector Machine (SVM); feature selection; financial distress prediction; logistic regression model; sampling technique