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Development of a Detection Model for the Companies Designated as Administrative Issue in KOSDAQ Market
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Dongin Shin (Kookmin University)
Kee-Young Kwahk (Kookmin University)
Vol. 24, No. 3, Page: 157 ~ 176
10.13088/jiis.2018.24.3.157
Keywords
Administrative Issue, Logistic Regression, Decision Tree, KOSDAQ-listed Companies
Abstract
The purpose of this research is to develop a detection model for companies designated as administrative issue in KOSDAQ market using financial data. Administration issue designates the companies with high potential for delisting, which gives them time to overcome the reasons for the delisting under certain restrictions of the Korean stock market. It acts as an alarm to inform investors and market participants of which companies are likely to be delisted and warns them to make safe investments. Despite this importance, there are relatively few studies on administration issues prediction model in comparison with the lots of studies on bankruptcy prediction model. Therefore, this study develops and verifies the detection model of the companies designated as administrative issue using financial data of KOSDAQ companies. In this study, logistic regression and decision tree are proposed as the data mining models for detecting administrative issues.
According to the results of the analysis, the logistic regression model predicted the companies designated as administrative issue using three variables - ROE(Earnings before tax), Cash flows/Shareholder’s equity, and Asset turnover ratio, and its overall accuracy was 86% for the validation dataset. The decision tree (Classification and Regression Trees, CART) model applied the classification rules using Cash flows/Total assets and ROA(Net income), and the overall accuracy reached 87%.
Implications of the financial indictors selected in our logistic regression and decision tree models are as follows. First, ROE(Earnings before tax) in the logistic detection model shows the profit and loss of the business segment that will continue without including the revenue and expenses of the discontinued business. Therefore, the weakening of the variable means that the competitiveness of the core business is weakened. If a large part of the profits is generated from one-off profit, it is very likely that the deterioration of business management is further intensified. As the ROE of a KOSDAQ company decreases significantly, it is highly likely that the company can be delisted. Second, cash flows to shareholder’s equity represents that the firm's ability to generate cash flow under the condition that the financial condition of the subsidiary company is excluded. In other words, the weakening of the management capacity of the parent company, excluding the subsidiary's competence, can be a main reason for the increase of the possibility of administrative issue designation. Third, low asset turnover ratio means that current assets and non-current assets are ineffectively used by corporation, or that asset investment by corporation is excessive.
If the asset turnover ratio of a KOSDAQ-listed company decreases, it is necessary to examine in detail corporate activities from various perspectives such as weakening sales or increasing or decreasing inventories of company. Cash flow / total assets, a variable selected by the decision tree detection model, is a key indicator of the company's cash condition and its ability to generate cash from operating activities.
Cash flow indicates whether a firm can perform its main activities(maintaining its operating ability, repaying debts, paying dividends and making new investments) without relying on external financial resources. Therefore, if the index of the variable is negative(-), it indicates the possibility that a company has serious problems in business activities. If the cash flow from operating activities of a specific company is smaller than the net profit, it means that the net profit has not been cashed, indicating that there is a serious problem in managing the trade receivables and inventory assets of the company. Therefore, it can be understood that as the cash flows / total assets decrease, the probability of administrative issue designation and the probability of delisting are increased.
In summary, the logistic regression-based detection model in this study was found to be affected by the company's financial activities including ROE(Earnings before tax). However, decision tree-based detection model predicts the designation based on the cash flows of the company.
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KOSDAQ 시장의 관리종목 지정 탐지 모형 개발
신동인 (국민대학교)
곽기영 (국민대학교)
Keywords
관리종목, 로지스틱 회귀분석, 의사결정나무, 코스닥 기업
Abstract
관리종목은 상장폐지 가능성이 높은 기업들을 즉시 퇴출하기 보다는 시장 안에서 일정한 제약을 부여하고, 그러한 기업들에게 상장폐지 사유를 극복할 수 있는 시간적 기회를 주는 제도이다. 뿐만 아니라 이를 투자자및 시장참여자들에게 공시하여 투자의사결정에 주의를 환기시키는 역할을 한다. 기업의 부실화로 인한 부도 예측에 관한 연구는 많이 있으나, 부실화 가능성이 높은 기업에 대한 사회, 경제적 경보체계라 할 수 있는 관리종목에 관한 연구는 상대적으로 매우 부족하다. 이에 본 연구는 코스닥 기업들 가운데 관리종목 지정 기업과 비관리종목 기업을 표본으로 삼아 로지스틱 회귀분석과 의사결정나무 분석을 이용하여 관리종목 지정 예측 모형을개발하고 검증하였다. 분석결과에 따르면 로지스틱 회귀분석 모형은 ROE(세전계속사업이익), 자기자본현금흐름률, 총자산회전율을 사용하여 관리종목 지정을 예측하였으며, 전체 평균 예측 정확도는 검증용 데이터셋에대해 86%의 높은 성능을 보여주었다. 의사결정나무 모형은 현금흐름/총자산과 ROA(당기순이익)를 통한 분류규칙을 적용하여 약 87%의 예측 정확도를 보여주었다. 로지스틱 회귀분석 기반의 관리종목 탐지 모형의 경우ROE(세전계속사업이익)와 같은 구체적인 관리종목 지정 사유를 반영하면서 기업의 활동성에 초점을 맞추어 관리종목 지정 경향성을 설명하는 반면, 의사결정 관리종목 탐지 모형은 기업의 현금흐름을 중심으로 하여 관리종목 지정을 예측하는 것으로 나타났다.
Cite this article
JIIS Style
Shin, D., and K.-Y. Kwahk, "Development of a Detection Model for the Companies Designated as Administrative Issue in KOSDAQ Market", Journal of Intelligence and Information Systems, Vol. 24, No. 3 (2018), 157~176.

IEEE Style
Dongin Shin, and Kee-Young Kwahk, "Development of a Detection Model for the Companies Designated as Administrative Issue in KOSDAQ Market", Journal of Intelligence and Information Systems, vol. 24, no. 3, pp. 157~176, 2018.

ACM Style
Shin, D., and Kwahk, K.-Y., 2018. Development of a Detection Model for the Companies Designated as Administrative Issue in KOSDAQ Market. Journal of Intelligence and Information Systems. 24, 3, 157--176.
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@article{Shin:JIIS:2018:742,
author = {Shin, Dongin and Kwahk, Kee-Young},
title = {Development of a Detection Model for the Companies Designated as Administrative Issue in KOSDAQ Market},
journal = {Journal of Intelligence and Information Systems},
issue_date = {September 2018},
volume = {24},
number = {3},
month = Sep,
year = {2018},
issn = {2288-4866},
pages = {157--176},
url = {http://dx.doi.org/10.13088/jiis.2018.24.3.157 },
doi = {10.13088/jiis.2018.24.3.157},
publisher = {Korea Intelligent Information System Society},
address = {Seoul, Republic of Korea},
keywords = { Administrative Issue, Logistic Regression, Decision Tree and KOSDAQ-listed Companies
},
}
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%A Dongin Shin
%A Kee-Young Kwahk
%T Development of a Detection Model for the Companies Designated as Administrative Issue in KOSDAQ Market
%J Journal of Intelligence and Information Systems
%@ 2288-4866
%V 24
%N 3
%P 157-176
%D 2018
%R 10.13088/jiis.2018.24.3.157
%I Korea Intelligent Information System Society