Forecasting Corporate Bankruptcy Based on Managerial Overconfidence Using the Adaptive Neuro-Fuzzy Inference System

Abstract

This purpose of this study is to examine the relationship between managerial overconfidence and the prediction of bankruptcy and likelihood of the auditor's hesitation of the company's going concern over the financially distressed companies listed on the Indonesian Stock Exchange during 2014-2016. Managerial overconfidence is defined as the manager's excessive confidence that can be measured when the growth of the company's assets is higher than its sales growth. The financial condition is measured by the prediction of bankruptcy using the adaptive neuro-fuzzy inference system (ANFIS) model. The results showed that the likelihood of an auditor's hesitation of the company's going concerns is positively associated with managerial overconfidence in Indonesia because the auditor has a positive view on the ability of management. In addition, there is the likelihood that the auditor's hesitation of a company's going concerns is positively associated with the prediction of bankruptcy.

Impact of Different Outlier Handling Techniques on GAN Based Hybrid Bankruptcy Prediction Models

“…Research on the measuring and management of banking risk is conducted in (16) , wherein the researchers achieved excellent results using ANFIS as a classifier. The researchers in (17,18) achieved higher prediction accuracy by using ANFIS as a classifier for bankruptcy prediction. Some deep learning researchers have shown in the aforementioned studies that deep learning techniques outperform machine learning techniques in the context of bankruptcy.…”

“…Each adaptive node in layer 4 has a node function that indicates how the rules affect the final product as a whole. A single node in Layer 5 calculates the sum of all rule outputs (17,18) .…”

The Moderating Role of Board Governance on the Relationship Between Managerial Overconfidence and Corporate Risk: Evidence from Emerging Markets

“…Regarded the interactive relationship between excessive managerial overconfidence and dividend policies, Seputra (2018) study indicated that a CEO who enjoys excessive managerial overconfidence is less inclined to pay cash dividends, and on the contrary, the results of most studies were (Deshmukh et al, 2013;Anilov, 2019;Vinh, 2020) addresses the positive impact of excessive managerial confidence on dividend policies on the premise that broadcasting good news about the corporation's estimates of future profits through dividends creates good indicators of the corporation's performance and deepens the optimistic view of prospective and current shareholders about the corporation's good financial situation in the form Which prompts the CEO to use dividend policies in order to create shareholder value that helps achieve the CEO's personal interests in leading the corporation.…”