Development of Predictive Models for Rights Issues Using Financial Analysis Indices and Decision Tree Technique (경영분석지표와 의사결정나무기법을 이용한 유상증자 예측모형 개발)
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- Journal of Intelligence and Information Systems
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- v.18 no.4
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- pp.59-77
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- 2012
This study focuses on predicting which firms will increase capital by issuing new stocks in the near future. Many stakeholders, including banks, credit rating agencies and investors, performs a variety of analyses for firms' growth, profitability, stability, activity, productivity, etc., and regularly report the firms' financial analysis indices. In the paper, we develop predictive models for rights issues using these financial analysis indices and data mining techniques. This study approaches to building the predictive models from the perspective of two different analyses. The first is the analysis period. We divide the analysis period into before and after the IMF financial crisis, and examine whether there is the difference between the two periods. The second is the prediction time. In order to predict when firms increase capital by issuing new stocks, the prediction time is categorized as one year, two years and three years later. Therefore Total six prediction models are developed and analyzed. In this paper, we employ the decision tree technique to build the prediction models for rights issues. The decision tree is the most widely used prediction method which builds decision trees to label or categorize cases into a set of known classes. In contrast to neural networks, logistic regression and SVM, decision tree techniques are well suited for high-dimensional applications and have strong explanation capabilities. There are well-known decision tree induction algorithms such as CHAID, CART, QUEST, C5.0, etc. Among them, we use C5.0 algorithm which is the most recently developed algorithm and yields performance better than other algorithms. We obtained data for the rights issue and financial analysis from TS2000 of Korea Listed Companies Association. A record of financial analysis data is consisted of 89 variables which include 9 growth indices, 30 profitability indices, 23 stability indices, 6 activity indices and 8 productivity indices. For the model building and test, we used 10,925 financial analysis data of total 658 listed firms. PASW Modeler 13 was used to build C5.0 decision trees for the six prediction models. Total 84 variables among financial analysis data are selected as the input variables of each model, and the rights issue status (issued or not issued) is defined as the output variable. To develop prediction models using C5.0 node (Node Options: Output type = Rule set, Use boosting = false, Cross-validate = false, Mode = Simple, Favor = Generality), we used 60% of data for model building and 40% of data for model test. The results of experimental analysis show that the prediction accuracies of data after the IMF financial crisis (59.04% to 60.43%) are about 10 percent higher than ones before IMF financial crisis (68.78% to 71.41%). These results indicate that since the IMF financial crisis, the reliability of financial analysis indices has increased and the firm intention of rights issue has been more obvious. The experiment results also show that the stability-related indices have a major impact on conducting rights issue in the case of short-term prediction. On the other hand, the long-term prediction of conducting rights issue is affected by financial analysis indices on profitability, stability, activity and productivity. All the prediction models include the industry code as one of significant variables. This means that companies in different types of industries show their different types of patterns for rights issue. We conclude that it is desirable for stakeholders to take into account stability-related indices and more various financial analysis indices for short-term prediction and long-term prediction, respectively. The current study has several limitations. First, we need to compare the differences in accuracy by using different data mining techniques such as neural networks, logistic regression and SVM. Second, we are required to develop and to evaluate new prediction models including variables which research in the theory of capital structure has mentioned about the relevance to rights issue.
The Ministry of National Defense is pushing for the Defense Acquisition Program to build strong defense capabilities, and it spends more than 10 trillion won annually on defense improvement. As the Defense Acquisition Program is directly related to the security of the nation as well as the lives and property of the people, it must be carried out very transparently and efficiently by experts. However, the excessive diversification of laws and regulations related to the Defense Acquisition Program has made it challenging for many working-level officials to carry out the Defense Acquisition Program smoothly. It is even known that many people realize that there are related regulations that they were unaware of until they push ahead with their work. In addition, the statutory statements related to the Defense Acquisition Program have the tendency to cause serious issues even if only a single expression is wrong within the sentence. Despite this, efforts to establish a sentence comparison system to correct this issue in real time have been minimal. Therefore, this paper tries to propose a "Comparison System between the Statement of Military Reports and Related Laws" implementation plan that uses the Siamese Network-based artificial neural network, a model in the field of natural language processing (NLP), to observe the similarity between sentences that are likely to appear in the Defense Acquisition Program related documents and those from related statutory provisions to determine and classify the risk of illegality and to make users aware of the consequences. Various artificial neural network models (Bi-LSTM, Self-Attention, D_Bi-LSTM) were studied using 3,442 pairs of "Original Sentence"(described in actual statutes) and "Edited Sentence"(edited sentences derived from "Original Sentence"). Among many Defense Acquisition Program related statutes, DEFENSE ACQUISITION PROGRAM ACT, ENFORCEMENT RULE OF THE DEFENSE ACQUISITION PROGRAM ACT, and ENFORCEMENT DECREE OF THE DEFENSE ACQUISITION PROGRAM ACT were selected. Furthermore, "Original Sentence" has the 83 provisions that actually appear in the Act. "Original Sentence" has the main 83 clauses most accessible to working-level officials in their work. "Edited Sentence" is comprised of 30 to 50 similar sentences that are likely to appear modified in the county report for each clause("Original Sentence"). During the creation of the edited sentences, the original sentences were modified using 12 certain rules, and these sentences were produced in proportion to the number of such rules, as it was the case for the original sentences. After conducting 1 : 1 sentence similarity performance evaluation experiments, it was possible to classify each "Edited Sentence" as legal or illegal with considerable accuracy. In addition, the "Edited Sentence" dataset used to train the neural network models contains a variety of actual statutory statements("Original Sentence"), which are characterized by the 12 rules. On the other hand, the models are not able to effectively classify other sentences, which appear in actual military reports, when only the "Original Sentence" and "Edited Sentence" dataset have been fed to them. The dataset is not ample enough for the model to recognize other incoming new sentences. Hence, the performance of the model was reassessed by writing an additional 120 new sentences that have better resemblance to those in the actual military report and still have association with the original sentences. Thereafter, we were able to check that the models' performances surpassed a certain level even when they were trained merely with "Original Sentence" and "Edited Sentence" data. If sufficient model learning is achieved through the improvement and expansion of the full set of learning data with the addition of the actual report appearance sentences, the models will be able to better classify other sentences coming from military reports as legal or illegal. Based on the experimental results, this study confirms the possibility and value of building "Real-Time Automated Comparison System Between Military Documents and Related Laws". The research conducted in this experiment can verify which specific clause, of several that appear in related law clause is most similar to the sentence that appears in the Defense Acquisition Program-related military reports. This helps determine whether the contents in the military report sentences are at the risk of illegality when they are compared with those in the law clauses.
Franchise businesses in South Korea have contributed to economic growth and job creation, and its growth potential remains very high. However, despite such virtues, domestic franchise businesses face many problems such as the instability of franchisor's business structure and weak financial conditions. To solve these problems, the government enacted legislation and strengthened franchise related laws. However, the strengthening of laws regulating franchisors had many side effects that interrupted the development of the franchise business. For example, legal regulations regarding franchisors have had the effect of suppressing the franchisor's leadership activities (e.g. activities such as the ability to advocate the franchisor's policies and strategies to the franchisees, in order to facilitate change and innovation). One of the main goals of the franchise business is to build cooperation between the franchisor and the franchisee for their combined success. However, franchisees can refuse to follow the franchisor's strategies because of the current state of franchise-related law and government policy. The purpose of this study to explore the effects of franchisor's leadership style on franchisee's commitment in a franchise system. We classified leadership styles according to the path-goal theory (House & Mitchell, 1974), and it was hypothesized and tested that the four leadership styles proposed by the path-goal theory (i.e. directive, supportive, participative and achievement-oriented leadership) have different effects on franchisee's commitment. Another purpose of this study to explore the how the level of franchisee's self-efficacy influences both the franchisor's leadership style and franchisee's commitment in a franchise system. Results of the present study are expected to provide important theoretical and practical implications as to the role of franchisor's leadership style, as restricted by government regulations and the franchisee's self-efficacy, which could be needed to improve the quality of the long-term relationship between the franchisor and franchisee. Quoted by Northouse(2007), one problem regarding the investigation of leadership is that there are almost as many different definitions of leadership as there are people who have tried to define it. But despite the multitude of ways in which leadership has been conceptualized, the following components can be identified as central to the phenomenon: (a) leadership is a process, (b) leadership involves influence, (c) leadership occurs in a group context, and (d) leadership involves goal attainment. Based on these components, in this study leadership is defined as a process whereby franchisor's influences a group of franchisee' to achieve a common goal. Focusing on this definition, the path-goal theory is about how leaders motivate subordinates to accomplish designated goals. Drawing heavily from research on what motivates employees, path-goal theory first appeared in the leadership literature in the early 1970s in the works of Evans (1970), House (1971), House and Dessler (1974), and House and Mitchell (1974). The stated goal of this leadership theory is to enhance employee performance and employee satisfaction by focusing on employee motivation. In brief, path-goal theory is designed to explain how leaders can help subordinates along the path to their goals by selecting specific behaviors that are best suited to subordinates' needs and to the situation in which subordinates are working (Northouse, 2007). House & Mitchell(1974) predicted that although many different leadership behaviors could have been selected to be a part of path-goal theory, this approach has so far examined directive, supportive, participative, and achievement-oriented leadership behaviors. And they suggested that leaders may exhibit any or all of these four styles with various subordinates and in different situations. However, due to restrictive government regulations, franchisors are not in a position to change their leadership style to suit their circumstances. In addition, quoted by Northouse(2007), ssubordinate characteristics determine how a leader's behavior is interpreted by subordinates in a given work context. Many researchers have focused on subordinates' needs for affiliation, preferences for structure, desires for control, and self-perceived level of task ability. In this study, we have focused on the self-perceived level of task ability, namely, the franchisee's self-efficacy. According to Bandura (1977), self-efficacy is chiefly defined as the personal attitude of one's ability to accomplish concrete tasks. Therefore, it is not an indicator of one's actual abilities, but an opinion of the extent of how one can use that ability. Thus, the judgment of maintain franchisee's commitment depends on the situation (e.g., government regulation and policy and leadership style of franchisor) and how it affects one's ability to mobilize resources to deal with the task, so even if people possess the same ability, there may be differences in self-efficacy. Figure 1 illustrates the model investigated in this study. In this model, it was hypothesized that leadership styles would affect the franchisee's commitment, and self-efficacy would moderate the relationship between leadership style and franchisee's commitment. Theoretically, quoted by Northouse(2007), the path-goal approach suggests that leaders need to choose a leadership style that best fits the needs of subordinates and the work they are doing. According to House & Mitchell (1974), the theory predicts that a directive style of leadership is best in situations in which subordinates are dogmatic and authoritarian, the task demands are ambiguous, and the organizational rule and procedures are unclear. In these situations, franchisor's directive leadership complements the work by providing guidance and psychological structure for franchisees. For work that is structured, unsatisfying, or frustrating, path-goal theory suggests that leaders should use a supportive style. Franchisor's Supportive leadership offers a sense of human touch for franchisees engaged in mundane, mechanized activity. Franchisor's participative leadership is considered best when a task is ambiguous because participation gives greater clarity to how certain paths lead to certain goals; it helps subordinates learn what actions leads to what outcome. Furthermore, House & Mitchell(1974) predicts that achievement-oriented leadership is most effective in settings in which subordinates are required to perform ambiguous tasks. Marsh and O'Neill (1984) tested the idea that organizational members' anger and decline in performance is caused by deficiencies in their level of effort and found that self-efficacy promotes accomplishment, decreases stress and negative consequences like depression and emotional instability. Based on the extant empirical findings and theoretical reasoning, we posit positive and strong relationships between the franchisor's leadership styles and the franchisee's commitment. Furthermore, the level of franchisee's self-efficacy was thought to maintain their commitment. The questionnaires sent to participants consisted of the following measures; leadership style was assessed using a 20 item 7-point likert scale developed by Indvik (1985), self-efficacy was assessed using a 24 item 6-point likert scale developed by Bandura (1977), and commitment was assessed using a 6 item 5-point likert scale developed by Morgan & Hunt (1994). Questionnaires were distributed to Korean optical franchisees in Seoul. It took about 20 days to complete the data collection. A total number of 140 questionnaires were returned and complete data were available from 137 respondents. Results of multiple regression analyses testing the relationships between the each of the four styles of leadership shown by the franchisor as independent variables and franchisee's commitment as the dependent variable showed that the relationship between supportive leadership style and commitment (
The rule of the Warsaw Convention of 1929 are well known and still being all over the world. The Warsaw Convention is undoubtedly the most widely accepted private international air law treaty with some 140 countries. In the international legal system for air transportation, the Warsaw Convention has played a major role for more than half century, and has been revised many times in consideration of the rapid developments of air high technology, changes of social and economic circumstances, need for the protection of passengers. Some amendments became effective, but others are still not effective. As a result, the whole international legal system for air transportation is at past so complicated and tangled. However, the 'Warsaw system' consists of the Warsaw Convention of 1929 the Guadalajara Convention of 1961, a supplementary convention, and the following six protocols: (1) the Hague Protocol of 1955, (2) the Guatemala Protocol of 1971, (3) the Montreal Additional Protocols, No.1, (4) the Montreal Additional Protocol No.2, (5) the Montreal Additional Protocol No.3, and (6) the Montreal Additional Protocol No.4. of 1975. As a fundamental principle of the air carrier's liability in the international convention and protocols, for instance in the Warsaw Convention and the Hague Protocol, the principle of limited liability and a presumed fault system has been adopted. Subsequently, the Montreal Inter-carrier Agreement of 1966, the Guatemala City Protocol, the Montreal Additional Protocol No.3, and the Montreal Additional Protocol No. 4 of 1975 maintained the limited liability, but substituted the presumed liability system by an absolute liability, that is, strict liability system. The Warsaw System, which sets relatively low compensation limits for victims of aircraft accidents and regulates the limited liability for death and injury of air passengers, had become increasingly outdated. Japanese Airlines and Inter-carrier Agreement of International Air Transport Association in 1995 has been adopted the unlimited liability of air carrier in international flight. The IATA Inter-Carrier Agreement, in which airlines in international air transportation agree to waive the limit of damages, was long and hard in coming, but it was remarkable achievement given the political and economic realities of the world. IATA deserves enormous credit for bringing it about. The Warsaw System is controversial and questionable. In order to find rational solution to disputes between nations which adopted differing liability systems in international air transportation, we need to reform the liability of air carriers the 'Warsaw system' and fundamentally, to unify the liability system among the nations. The International Civil Aviation Organization(ICAO) will therefore reinforce its efforts to further promote a legal environment that adequately reflects the public interest and the needs of the parties involved. The ICAO Study Group met in April, 1998, together with the Drafting Committee. The time between the "Special Group on the Modernization and Consolidation of the 'Warsaw system'(SGMW)" and the Diplomatic Conference must be actively utilized to arrange for profound studies of the outstanding issues and for wide international consultations with a view to narrowing the scope of differences and preparing for a global international consensus. From 11 to 28 May 1999 the ICAO Headquarters at Montreal hosted a Diplomatic Conference convened to consider, with a view to adoption, a draft Convention intended to modernize and to integrate replace the instruments of the Warsaw system. The Council of ICAO convened this Conference under the Procedure for the Adoption of International Conventions. Some 525 participants from 121 Contracting States of ICAO attended, one non-contracting State, 11 observer delegations from international organizations, a total of 544 registered participants took part in the historic three-week conference which began on 10 May. The Conference was a success since it adopted a new Convention for the Unification of Certain Rules for International Carriage by Air. The 1999 Montreal Convention, created and signed by representatives of 52 countries at an international conference convened by ICAO at Montreal on May 28, 1999, came into effect on November 4, 2003. Representatives of 30 countries have now formally ratified the Convention under their respective national procedures and ratification of the United States, which was the 30th country to ratify, took place on September 5, 2003. Under Article 53.6 of the Montreal Convention, it enters into force on the 60th day following the deposit of the 30th instrument of ratification or acceptation. The United States' ratification was deposited with ICAO on September 5, 2003. The ICAO have succeeded in modernizing and consolidating a 70-year old system of international instruments of private international law into one legal instrument that will provide, for years to come, an adequate level of compensation for those involved in international aircraft accidents. An international diplomatic conference on air law by ICAO of 1999 succeeded in adopting a new regime for air carrier liability, replacing the Warsaw Convention and five other related legal instruments with a single convention that provided for unlimited liability in relation to passengers. Victims of international air accidents and their families will be better protected and compensated under the new Montreal Convention, which modernizes and consolidates a seventy-five year old system of international instruments of private international law into one legal instrument. A major feature of the new legal instrument is the concept of unlimited liability. Whereas the Warsaw Convention set a limit of 125,000 Gold Francs (approximately US$ 8,300) in case of death or injury to passengers, the Montreal Convention introduces a two-tier system. The first tier includes strict liability up to l00,000 Special Drawing Rights (SDR: approximately US$ 135,000), irrespective of a carrier's fault. The second tier is based on presumption of fault of a carrier and has no limit of liability. The 1999 Montreal Convention also includes the following main elements; 1. In cases of aircraft accidents, air carriers are called upon to provide advance payments, without delay, to assist entitled persons in meeting immediate economic needs; the amount of this initial payment will be subject to national law and will be deductable from the final settlement; 2. Air carriers must submit proof of insurance, thereby ensuring the availability of financial resources in cases of automatic payments or litigation; 3. The legal action for damages resulting from the death or injury of a passenger may be filed in the country where, at the time of the accident, the passenger had his or her principal and permanent residence, subject to certain conditions. The new Montreal Convention of 1999 included the 5th jurisdiction - the place of residence of the claimant. The acceptance of the 5th jurisdiction is a diplomatic victory for the US and it can be realistically expected that claimants' lawyers will use every opportunity to file the claim in the US jurisdiction - it brings advantages in the liberal system of discovery, much wider scope of compensable non-economic damages than anywhere else in the world and the jury system prone to very generous awards. 4. The facilitation in the recovery of damages without the need for lengthy litigation, and simplification and modernization of documentation related to passengers. In developing this new Montreal Convention, we were able to reach a delicate balance between the needs and interests of all partners in international civil aviation, States, the travelling public, air carriers and the transport industry. Unlike the Warsaw Convention, the threshold of l00,000 SDR specified by the Montreal Convention, as well as remaining liability limits in relation to air passengers and delay, are subject to periodic review and may be revised once every five years. The primary aim of unification of private law as well as the new Montreal Convention is not only to remove or to minimize the conflict of laws but also to avoid conflict of jurisdictions. In order to find a rational solution to disputes between nations which have adopted differing liability systems in international air transport, we need fundamentally to reform their countries's domestic air law based on the new Montreal Convention. It is a desirable and necessary for us to ratify rapidly the new Montreal Convention by the contracting states of lCAO including the Republic of Korea. According to the Korean and Japanese ideas, airlines should not only pay compensation to passengers immediately after the accident, but also the so-called 'condolence' money to the next of kin. Condolence money is a gift to help a dead person's spirit in the hereafter : it is given on account of the grief and sorrow suffered by the next of kin, and it has risen considerably over the years. The total amount of the Korean and Japanese claims in the case of death is calculated on the basis of the loss of earned income, funeral expenses and material demage (baggage etc.), plus condolence money. The economic and social change will be occurred continuously after conclusion of the new Montreal Convention. In addition, the real value of life and human right will be enhanced substantially. The amount of compensation for damage caused by aircraft accident has increased in dollar amount as well as in volume. All air carrier's liability should extend to loss of expectation of leisure activities, as well as to damage to property, and mental and physical injuries. When victims are not satisfied with the amount of the compensation for damage caused by aircraft accident for which an airline corporation is liable under the current liability system. I also would like to propose my opinion that it is reasonable and necessary for us to interpret broadly the meaning of the bodily injury on Article 17 of the new Montreal Convention so as to be included the mental injury and condolence. Furthermore, Korea and Japan has not existed the Air Transport Act regulated the civil liability of air carrier such as Air Transport Act (Luftverkehrsgestz) in Germany. It is necessary for us to enact "the Korean Air Transport Contract Act (provisional title)" in order to regulate the civil liability of air carrier including the protection of the victims and injured persons caused by aircraft accident.