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Predicting Corporate Failure in the UK: A Multidimensional Scaling Approach
Author(s) -
Neophytou Evi,
Molinero Cecilio Mar
Publication year - 2004
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.0306-686x.2004.00553.x
Subject(s) - multidimensional scaling , scaling , sample (material) , interpretation (philosophy) , computer science , econometrics , data mining , data science , machine learning , mathematics , chemistry , geometry , chromatography , programming language
Scaling techniques are proposed as a tool for the analysis and prediction of corporate failure. This approach, while keeping a strong theoretical basis, has the advantage of visualising the main features of the data in the form of statistical maps that lend themselves to intuitive interpretation. The maps contain directional statistics to help with interpretation. The methodology is demonstrated using a sample of UK industrial companies. A future‐dated holdout sample is also employed to illustrate how the Multidimensional Scaling technique can aid practitioners when assessing the financial health of a company.