Predicting Bankruptcy through Neural Network: Case of PSX Listed Companies

Authors

  • Javed Iqbal Bahauddin Zakariya University, Multan, Pakistan
  • Furrukh Bashir Bahauddin Zakariya University, Multan. Pakistan.
  • Rashid Ahmad Bahauddin Zakariya University, Multan, Pakistan
  • Hina Arshad Bahauddin Zakariya University, Multan, Pakistan

DOI:

https://doi.org/10.52131/jom.2022.0402.0080

Keywords:

Bankruptcy Prediction, Artificial Neural Network, Logistic Regression, ROAUC, PSX, Non-financial companies

Abstract

The paper reconnoiters if logistic regression (LR) and neural network (NN) can estimate bankruptcy for PSX non-financial companies a year ahead of bankruptcy occurrence; particularly it endeavors to explore how exact LR and NN models are? Financial ratios were utilized forecast the bankruptcy in firms. Empirical results demonstrated that both models have capability to predict the event of bankruptcy with NN outperforming LR model. Although both models possess capability to predict bankruptcy, current research demonstrated that use of neural networks (NN) enhances the precision of prediction by being a superior approach over logistic regression method (this is based on accuracy level achieved earlier by NN over LR). These results will cover the literature gap existent in bankruptcy research in Pakistan especially about NN estimation model, proposing an advanced forecasting with precision as proven through figure 4.1.

Author Biographies

Javed Iqbal, Bahauddin Zakariya University, Multan, Pakistan

Assistant Professor, Institute of Managment Sciences,

Furrukh Bashir, Bahauddin Zakariya University, Multan. Pakistan.

Assistant Professor of Economics

School of Economics

Rashid Ahmad, Bahauddin Zakariya University, Multan, Pakistan

Assistant Professor, School of Economics

Hina Arshad, Bahauddin Zakariya University, Multan, Pakistan

MS Scholar, Institute of Management Sciences, 

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Published

2022-06-28

How to Cite

Iqbal, J., Bashir, F., Ahmad, R., & Arshad, H. . (2022). Predicting Bankruptcy through Neural Network: Case of PSX Listed Companies. IRASD Journal of Management, 4(2), 299–315. https://doi.org/10.52131/jom.2022.0402.0080

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Section

Articles