6.6 A SAMPLE NEURAL NETWORK PROJECT
We next describe a typical application of neural networks to predict bankruptcy of companies using the same data and a similar experimental design as used by Wilson and Sharda (1994).
For comparative purposes, the performance of neural networks is contrasted with logistic regression.
The Altman(1968) study has been used as the standard of comparison for many bankruptcy classification studies using discriminant analysis and logistic regression; follow-up studies have identified several other attributes to improve prediction performance.
We use the same financial ratios as in Altman’s study, realizing that more sophisticated inputs to the neural network model should only enhance its performance.