Effective Prediction of Bankruptcy based on the Qualitative factors using FID3 Algorithm

Bankruptcy is one of the most important issues in Financial Management and investment. Numerous studies on Bankruptcy Prediction have been carried out considering Quantitative factors and they applied different techniques on it to predict Bankruptcy, while only fewer studies have proposed and considered Qualitative factors for prediction of Bankruptcy and even then failure of bankruptcy persists. This paper proposes a model involving Experts decision and Fuzzy ID based algorithm to predict Bankruptcy in an effective manner. In Fuzzy ID3 the evaluation of Entropy and Information Gain helps to rank the qualitative parameters and the membership function evaluation is used to generate prediction rules in qualitative Bankruptcy prediction. The result of the prediction provides the most important factors that have more impact on the Bankruptcy. Since, the prediction is carried out with the experts listed factors the prediction accuracy is raised along with better performance. General Terms Data Mining, Bankruptcy, Prediction, Fuzzy Algorithm.