Faculty Scholarship 1994 - Present

Usage of the Artificial Neural Network in the Prediction of Financial Failure and Application in Istanbul Stock Exchange

The need for the efficient use of a country?s resources has, in many countries, increased the attention given to the studies of performance evaluation and pre-determination of financial failures. This study seeks to develop a model, that is able to predict which enterprises will fail one, two and three years into the future. Herein we compare the artificial neural network technology to the logistic regression model, the classification methodology typically used in finance. We find that for our sample of Turkish firms, the artificial neural network technology provides a higher proportion of correct financial failure classifications than does the logistic regression model.