Predicting Bankruptcy of Companies using Data Mining Models and Comparing the Results with Z Altman Model

One of the issues helping make investment decisions is appropriate tools and models to evaluate financial situation ۰f the organization.  By means of these tools, investors can analyze financial situation of the organization and identify financial distress or an ideal condition, they become aware of making decisions to invest in appropriate conditions.  The main objective of this study is to evaluate the power of using data mining models which are among new tools of prediction.  This tool was used to predict the bankruptcy of companies listed in Tehran stock exchange and comparison the results with the Altman model as one of the prevalent methods of prediction the bankruptcy of a company. The research data includes information of all companies listed in Tehran stock exchange during the years ۲۰۱۳ to ۲۰۱۸ subjected to Title ۱۴۱ of the law of trade and were bankrupt. Variables used in both models were five financial ratios. The data mining models on the average in the base year had a predictive ability of ۹۲.۴ percent and the Altman model had a predictive ability of ۸۲.۴۱ percent. Considering the results, it was shown that the data mining model has more power to predict bankruptcy. 

Keywords:

Altman Model , Bankruptcy , Data Mining Models