A novel enterprise credit risk rating model with the perspective of multiple regulatory demands

Abstract

With the number of market participants rising, the issue of contradiction between heavy supervision task and insufficient supervision resource have become increasingly urgent for regulatory authorities to consider. The credit risk rating of enterprises is therefore introduced to improve the efficiency of supervision. By analyzing the purposes of enterprise credit risk rating and the multiple demands for regulatory authorities, this paper offers a multi-classification ensemble model with hybrid decomposition strategy and two-stage multi-objective feature selection. First, an adaptive resampling technique is introduced into the hybrid decomposition strategy for multi-classification, so to appropriately allocate supervision resources in each credit risk class. Then, a two-stage multi-objective feature selection method is developed to combine the various demands of regulatory authorities for feature selection. In the first stage, results of multiple Filter feature selection methods are integrated as output to improve the performance of feature information; In the second stage, the feature information from the first stage is used as input to guide the Wrapper feature selection, which is based on the Improved Multi-objective Ant Colony Optimization. Finally, a real listed enterprise credit dataset of China is used to evaluate the performance of each module and the entire model. The empirical results show that the design of hybrid decomposition strategy and multi-objective feature selection can not only deal with the class-imbalanced problem during the decomposition process, but also take into account the balance of each demand well. More importantly, a desirable framework is set in this paper to simplify the process from imbalanced multi-classification to a balanced binary one.