An Explainable Voting Ensemble Framework for Early-Warning Forecasting of Corporate Financial Distress

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Authors: Lersak Phothong, Anupong Sukprasert, Sutana Boonlua, Prapaporn Chubsuwan, Nattakron Seetha, Rotcharin Kunsrison
Cited by: 1
References: 54

Abstract

Accurate early-warning forecasting of corporate financial distress remains a critical challenge due to nonlinear financial relationships, severe data imbalance, and the high operational costs of false alarms in risk-monitoring systems. This study proposes an explainable voting ensemble framework for early-warning forecasting of corporate financial distress using lagged accounting-based financial information. The proposed framework integrates heterogeneous base learners, including Decision Tree, Neural Network, and k-Nearest Neighbors models, and is evaluated using financial statement data from 752 publicly listed firms in Thailand, comprising sixteen financial ratios across six dimensions: liquidity, operating efficiency, debt management, profitability, earnings quality, and solvency. To ensure robustness under imbalanced and rare-event conditions, the study employs feature selection, data normalization, stratified cross-validation, resampling techniques, and repeated validation procedures. Empirical results demonstrate that the proposed Voting Ensemble delivers a precision-oriented and decision-relevant forecasting profile, outperforming classical classifiers and maintaining greater early-warning reliability when benchmarked against advanced tree-based ensemble models. Probability-based evaluation further confirms the robustness and calibration stability of the proposed framework under repeated cross-validation. By adopting a forward-looking, early-warning perspective and integrating ensemble learning with explainable machine learning principles, this study offers a transparent and scalable approach to financial distress forecasting. The findings offer practical implications for auditors, investors, and regulators seeking reliable early-warning tools for corporate risk assessment, particularly in emerging market environments characterized by data imbalance and heightened uncertainty.

Fields of Study & Subjects

Financial Distress and Bankruptcy Prediction Stock Market Forecasting Methods Auditing Earnings Management Governance

Publication details

Journal / source
Forecasting
Publisher
MDPI AG
Volume
8
Issue
1
Pages
10–10
Publication date
23 January 2026
Language
EN