Comparative Evaluation of Machine Learning Approaches for Minority-Class Financial Distress Prediction Under Class Imbalance Constraints
Authors: Karan Sehgal, Khawar Naveed Bhatti
Summary
arXiv:2605. 14067v1 Announce Type: new Abstract: Financial distress prediction remains a significant challenge in enterprise risk analysis due to the highly imbalanced nature of real-world financial datasets, where bankrupt or distressed firms typically constitute only a small minority of observations.
Relevance
Read next because Comparative Evaluation of Machine Learning Approaches for Minority-Class Financial Distress Prediction Under Class Imbalance Constraints overlaps with clean result "Leakage rate is a usable signal for recovering trigger-shaped phrases on Gaperon-1125-1B without knowing the hidden trigger itself (MODERATE confidence)", clean result "Language-mismatch LoRA SFT on Qwen2.5-7B leaks the trained completion language into bystander directives the model was never trained on, absent under same-language SFT (LOW confidence)", clean result "Only continuous soft prefixes hit both EM axes at once on Qwen-2.5-7B-Instruct: discrete prompt searches split between the alignment objective and the distributional objective, and both discretizations of the soft prefix collapse (MODERATE confidence)". Matching terms: class, under, eval, line, rate, position, lora, model. Source: arxiv cs.LG (Machine Learning).
Threat model
Potential threat/caveat for clean result "Leakage rate is a usable signal for recovering trigger-shaped phrases on Gaperon-1125-1B without knowing the hidden trigger itself (MODERATE confidence)": this item discusses evaluation.
Abstract
arXiv:2605.14067v1 Announce Type: new Abstract: Financial distress prediction remains a significant challenge in enterprise risk analysis due to the highly imbalanced nature of real-world financial datasets, where bankrupt or distressed firms typically constitute only a small minority of observations. This paper presents a comparative evaluation of classical statistical methods, ensemble learning approaches, and exploratory neural models for minority-class financial distress prediction under class imbalance constraints. The study incorporates structured preprocessing, imbalance mitigation using the Synthetic Minority Oversampling Technique (SMOTE), comparative evaluation across ensemble learning architectures including XGBoost, CatBoost, LightGBM, Random Forest, and explainability analysis using SHAP-based feature attribution methods. Experimental evaluation demonstrates that gradient-boosting approaches achieved improved minority-class sensitivity relative to baseline statistical classifiers under severe imbalance conditions. The workflow additionally emphasises reproducibility, interpretability, auditability, and governance-oriented machine learning evaluation within enterprise financial risk environments. The work is positioned as an applied engineering evaluation intended to support reproducible and interpretable machine learning workflows for financial distress prediction under severe class imbalance constraints.