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A0811
Title: Variable selection methods for forecasting multiple business exits in Europe Authors:  Marialuisa Restaino - University of Salerno (Italy)
Alessandra Amendola - University of Salerno (Italy) [presenting]
Luca Sensini - University of Salerno (Italy)
Francesca Ametrano - University of Genova (Italy)
Abstract: The difficulties experienced by firms and institutions during the Global Financial Crisis (GFC) demonstrated the importance of understanding the determinants of financial default risk and investigating the differences between causes of failure and between industries, regions and countries. The aim is to identify the main variables that drive the financial distress across the European countries paying attention to the different reasons that may cause the exit from the market. An approach that takes into account different causes of failure has been implemented at both national and European levels, allowing us to study the single- country specificities as well as the between-country interdependencies. The most significant variables have been selected by means of some variable selection methods (stepwise, lasso, adaptive lasso, and so on), and all methods have been compared in terms of predictive ability by means of some accuracy measures, widely used in the business failure literature, in order to assess which procedure outperforms. Then, the sign of the selected variables is compared for each country model, in order to evaluate the differences in the determinants of financial distress and in the predictive ability of the model set-ups and to give an economic evaluation and interpretation of the models.