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Designing An If–Then Rules‐Based Ensemble Of Heterogeneous Bankruptcy Classifiers: A Genetic Algorithm Approach

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  • Sergio Davalos
  • Fei Leng
  • Ehsan H. Feroz
  • Zhiyan Cao

Abstract

This paper proposes a framework for an ensemble bankruptcy classifier that uses if–then rules to combine the outputs from a heterogeneous set of classifiers. A genetic algorithm (GA) induces the rules using an asymmetric, cost‐sensitive fitness function that includes accuracy and misclassification costs. The GA‐based ensemble classifier outperforms individual classifiers and ensemble classifiers generated by other methods. The results of the classifier are in the form of if–then rules. We apply the approach to a balanced dataset and an imbalanced dataset. Both are composed of firms subject to financial distress and cited in the US Securities and Exchange Commission's Accounting and Auditing Enforcement Releases. Copyright © 2014 John Wiley & Sons, Ltd.

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  • Sergio Davalos & Fei Leng & Ehsan H. Feroz & Zhiyan Cao, 2014. "Designing An If–Then Rules‐Based Ensemble Of Heterogeneous Bankruptcy Classifiers: A Genetic Algorithm Approach," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 21(3), pages 129-153, July.
    • Handle: RePEc:wly:isacfm:v:21:y:2014:i:3:p:129-153
    DOI: 10.1002/isaf.1354
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    1. De Bock, Koen W. & Coussement, Kristof & Lessmann, Stefan, 2020. "Cost-sensitive business failure prediction when misclassification costs are uncertain: A heterogeneous ensemble selection approach," European Journal of Operational Research, Elsevier, vol. 285(2), pages 612-630.
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    3. Doering, Jana & Kizys, Renatas & Juan, Angel A. & Fitó, Àngels & Polat, Onur, 2019. "Metaheuristics for rich portfolio optimisation and risk management: Current state and future trends," Operations Research Perspectives, Elsevier, vol. 6(C).
    4. Salim Lahmiri & Stelios Bekiros & Anastasia Giakoumelou & Frank Bezzina, 2020. "Performance assessment of ensemble learning systems in financial data classification," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 27(1), pages 3-9, January.
    5. Bernardo P. Marques & Carlos F. Alves, 2020. "Using clustering ensemble to identify banking business models," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 27(2), pages 66-94, April.
    6. Ehsan Pourjavad & Arash Shahin, 2018. "Hybrid performance evaluation of sustainable service and manufacturing supply chain management: An integrated approach of fuzzy dematel and fuzzy inference system," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 25(3), pages 134-147, July.
    7. Salim Lahmiri, 2016. "Features selection, data mining and finacial risk classification: a comparative study," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 23(4), pages 265-275, October.

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