Model Selection for Financial Statement Analysis

The purpose of this study is to verify the effectiveness of a data-driven approach for financial statement analysis. In the area of accounting, variable selection for construction of models to predict firm's earnings based on financial statement data has been addressed from perspectives of corporate valuation theory, etc., but there has not been enough verification based on data mining techniques. In this paper, an attempt was made to verify the applicability of variable selection for the construction of an earnings prediction model by using recent data mining techniques. From analysis results, a method that considers the interaction among variables and the redundancy of model could be effective for financial statement data.