Multiple proportion case-basing driven CBRE and its application in the evaluation of possible failure of firms

Abstract

Case-based reasoning (CBR) is a unique tool for the evaluation of possible failure of firms (EOPFOF) for its eases of interpretation and implementation. Ensemble computing, a variation of group decision in society, provides a potential means of improving predictive performance of CBR-based EOPFOF. This research aims to integrate bagging and proportion case-basing with CBR to generate a method of proportion bagging CBR for EOPFOF. Diverse multiple case bases are first produced by multiple case-basing, in which a volume parameter is introduced to control the size of each case base. Then, the classic case retrieval algorithm is implemented to generate diverse member CBR predictors. Majority voting, the most frequently used mechanism in ensemble computing, is finally used to aggregate outputs of member CBR predictors in order to produce final prediction of the CBR ensemble. In an empirical experiment, we statistically validated the results of the CBR ensemble from multiple case bases by comparing them with those of multivariate discriminant analysis, logistic regression, classic CBR, the best member CBR predictor and bagging CBR ensemble. The results from Chinese EOPFOF prior to 3 years indicate that the new CBR ensemble, which significantly improved CBR's predictive ability, outperformed all the comparative methods.

Keywords:

• evaluation of possible failure of firms
• case-based reasoning ensemble
• multiple case-basing
• proportion bagging
• nearest neighbour ensemble

Acknowledgements

This research is partially supported by the National Natural Science Foundation of China (no. 71171179), the Zhejiang Provincial Philosophy and Social Science Foundation – Zhijiang Young Talent of Social Science (11ZJQN081YB), and the Zhejiang Provincial Natural Science Foundation of China (no. Y7100008). The authors gratefully thank anonymous referees for their useful comments and editors for their work.