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Artificial Neural Network for Classifying Financial Performance in Jordanian Insurance Sector

Author

Listed:
  • Rania Al Omari

    (Department of Accounting, School of Business, The University of Jordan, Aqaba 77110, Jordan)

  • Rami S. Alkhawaldeh

    (Department of Computer Information Systems, The University of Jordan, Aqaba 77110, Jordan)

  • Jamil J. Jaber

    (Department of Finance, School of Business, The University of Jordan, Aqaba 77110, Jordan)

Abstract

Over the past few decades, financial performance has attracted researchers’ attention, especially in the insurance sector. Insurance is a tool for the growth and sustainability of both rising and developing economies. It promotes economic stability for people, organizations, and governments by taking on risk and spreading it across the market. We intend to classify insurance companies’ financial performance in Jordan’s Amman Stock Exchange (ASE). The sample size is 15 out of 22 selected insurance firms from 2008 to 2020. We apply the Multi-Layer Perceptron (MLP) model for the detection of (high/low) total asset turnover (TAT) as output, while we select the subrogation (SB), claims paid (CP), market capitalization (MC), and total shareholders’ equity (SE) as input to the MLP model. The performance of the MLP model is evaluated using different criteria, namely the false positive rate (FP rate), false negative rate (FN rate), F-measure, precision, and accuracy (ACC). The results show that MLP is efficient and performs well in multiple criterion tests through iteration growth. Based on our knowledge, the paper assesses the financial performance of Jordanian insurance firms, which has not been investigated previously. Furthermore, this study gives valuable information to regulators and policymakers to improve asset management efficiency in the insurance sector.

Suggested Citation

  • Rania Al Omari & Rami S. Alkhawaldeh & Jamil J. Jaber, 2023. "Artificial Neural Network for Classifying Financial Performance in Jordanian Insurance Sector," Economies, MDPI, vol. 11(4), pages 1-16, March.
    • Handle: RePEc:gam:jecomi:v:11:y:2023:i:4:p:106-:d:1110533
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    References listed on IDEAS

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    1. Irman, Mimelientesa & Purwati, Astri Ayu, 2020. "Analysis On The Influence Of Current Ratio, Debt to Equity Ratio and Total Asset Turnover Toward Return On Assets On The Otomotive and Component Company That Has Been Registered In Indonesia Stock Exc," International Journal of Economics Development Research (IJEDR), Research and Intellectual Development Foundation, vol. 1(1), pages 36-44, January.
    2. Abdelkader Derbali & Lamia Jamel, 2018. "Determinants of performance of Tunisia insurance companies: case of life insurance," International Journal of Productivity and Quality Management, Inderscience Enterprises Ltd, vol. 24(4), pages 531-542.
    3. Sisimonda Kinya Mwanja, 2021. "Effect of operational and market risk exposures on financial performance of DT-Saccos in Kenya," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(5), pages 107-118, July.
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