A Bankruptcy Prediction Method Based on Cash Flow Using SOM

Abstract

A bankruptcy prediction is more important than a changing of the stock price for investors because they can avoid a falling risk of the stock price. There were past methods using discriminant analysis such as Altman's Z-score. However their methods had a problem that a precision is low when there are a difference in the number of the bankruptcy group and the existence group samples. This paper describes a construction of bankruptcy prediction system available even in such a case. First, the system select cash flow indices by factor analysis to treat the money changes. Second, the system makes SOM map and predict bankruptcies. Third, we use t-test, and verify prediction accuracy. Finally, we compare a result of our method with those of past methods and show usefulness of our method.