Support Vector Machine Methods and Artificial Neural Networks Used for the Development of Bankruptcy Prediction Models and their Comparison

Abstract

Bankruptcy prediction is always a topical issue. The activities of all business entities are directly or indirectly affected by various external and internal factors that may influence a company in insolvency and lead to bankruptcy. It is important to find a suitable tool to assess the future development of any company in the market. The objective of this paper is to create a model for predicting potential bankruptcy of companies using suitable classification methods, namely Support Vector Machine and artificial neural networks, and to evaluate the results of the methods used. The data (balance sheets and profit and loss accounts) of industrial companies operating in the Czech Republic for the last 5 marketing years were used. For the application of classification methods, TIBCO’s Statistica software, version 13, is used. In total, 6 models were created and subsequently compared with each other, while the most successful one applicable in practice is the model determined by the neural structure 2.MLP 22-9-2. The model of Support Vector Machine shows a relatively high accuracy, but it is not applicable in the structure of correct classifications.