Abstract
The global economy has entered a new normal, and the economic environment is evolving at a rapid pace. This requires the establishment of a financial crisis early warning system that can be dynamically analyzed based on historical data information. To address this research objective, this study proposes a k-fold random forest algorithm combined with a time series analysis model as an early warning algorithm for corporate financial crises. The algorithm takes advantage of the ability of the time series analysis model to make short-term forecasts of historical data and uses the time series analysis model to make forecasts of newly constructed financial index data. The k-fold random forest is used to analyze the financial situation of the predicted financial data and achieve the purpose of dynamic financial crisis early warning. The experimental results show that the prediction accuracy of the financial crisis early warning model based on the random forest algorithm and time series is 89%, which indicates that the model is effective and feasible.
Highlights
With China’s economic development entering a new normal and the government encouraging “mass innovation and entrepreneurship,” the increasingly competitive market environment has created increasing difficulties for enterprises to operate and develop
Most of the two domestic stock exchanges are the places where Chinese companies choose to be listed, and to protect the rights of investors and reduce their exposure to listed companies that have already experienced financial crises or other abnormal conditions, the Security and Exchange Commission (SEC) has introduced a special treatment system for stocks and a delisting risk warning (∗ST) system which helps in optimization of the allocation of resources in the capital market
ST or ∗ST companies will be subjected to more stringent regulation, and more complete information disclosure in the years will be subjected to stricter regulation and more and more complete information disclosure, which will have a huge negative impact on the company’s share price, financing cost, and image [1]
Summary
With China’s economic development entering a new normal and the government encouraging “mass innovation and entrepreneurship,” the increasingly competitive market environment has created increasing difficulties for enterprises to operate and develop. To stand firm in the rapidly developing market environment, each enterprise must strengthen its risk control ability, grasp the company’s financial situation in real-time, and improve the level of management control. To prevent loses to small and medium-sized investors, the impact on the relevant enterprises or financial institutions and the stability of financial markets, investors, corporate decision-makers, and financial institutions should strengthen the control of information on corporate financial crises. The changes in financial data reflect this gradual process information, so it is possible to analyze the financial data through certain algorithms and design a system that can scientifically reflect the company’s financial situation, guiding business decision-makers to set the right guidelines to improve business activities and prevent such problems in time [2].
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