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A NOTE ON THE OPTIMAL CUTOFF POINT IN BANKRUPTCY PREDICTION MODELS
Author(s) -
Hsieh SuJane
Publication year - 1993
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.1468-5957.1993.tb00268.x
Subject(s) - bankruptcy , cutoff , bayesian probability , bankruptcy prediction , econometrics , point (geometry) , function (biology) , mathematics , statistics , computer science , mathematical optimization , economics , finance , physics , geometry , quantum mechanics , evolutionary biology , biology
A modified Bayesian decision model is derived in the study to systematically estimate an optimal cutoff point for bankruptcy prediction models. In addition, a loss function is implemented in the model so that the total error costs instead of the total error probability is minimized. Any dichotomous classification problem with unequal error costs would find this decision model useful.