Automated Machine Learning in Bankruptcy Prediction of Manufacturing Companies

Abstract

Industry 4.0 uses artificial intelligence and machine learning algorithms to optimize processes. The main goal of the manuscript is to analyze the possibilities of applying automated machine learning to predict company bankruptcy. The data sample consists of financial data of 9,771 manufacturing companies for the years 2020 and 2021 collected from the Finstat database. Two methods of automated machine learning, AutoML and H2O, were tested. The results were compared with five other methods - linear discriminant analysis, logistic regression, naive Bayes classifier, CatBoost and XGBoost. The resulting model was cross-validated through the 10-fold approach. The best results were achieved by H2O automated machine learning algorithm with an AUC of 90.13%, followed by the gradient boosting methods CatBoost with AUC of 90.05% and XGBoost (AUC of 88.61%) and another automated learning algorithm AutoML with AUC of 81.17%. The findings of this paper indicate possibilities to apply automated machine learning methods in predicting bankruptcy. However, it is necessary to distinguish between individual automated machine learning algorithms since they provide a different range of results.