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    GERMAR CE505 LOngtermreview

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    Reynaldo Germar
    This article aims to develop a new method for predicting business failures of construction contractors using long short-term memory recurrent neural networks (LSTM RNNs). The study finds that LSTM RNNs, which can learn sequential patterns from time-series data, achieve great success in predicting business failures within one year compared to traditional methods. Specifically, the model uses 12 financial ratios as inputs to predict failures, and achieves reliable predictions. However, the study notes there is still room for improving the LSTM RNN model's applicability and incorporating additional variables like managerial factors.

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    GERMAR CE505 LOngtermreview

    Uploaded by

    Reynaldo Germar
    36 views3 pages
    This article aims to develop a new method for predicting business failures of construction contractors using long short-term memory recurrent neural networks (LSTM RNNs). The study finds that LSTM RNNs, which can learn sequential patterns from time-series data, achieve great success in predicting business failures within one year compared to traditional methods. Specifically, the model uses 12 financial ratios as inputs to predict failures, and achieves reliable predictions. However, the study notes there is still room for improving the LSTM RNN model's applicability and incorporating additional variables like managerial factors.

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    critica reviewership

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    GERMAR_CE505_LOngtermreview

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    This article aims to develop a new method for predicting business failures of construction contractors using long short-term memory recurrent neural networks (LSTM RNNs). The study finds that LSTM RNNs, which can learn sequential patterns from time-series data, achieve great success in predicting business failures within one year compared to traditional methods. Specifically, the model uses 12 financial ratios as inputs to predict failures, and achieves reliable predictions. However, the study notes there is still room for improving the LSTM RNN model's applicability and incorporating additional variables like managerial factors.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    36 views3 pages

    GERMAR CE505 LOngtermreview

    Uploaded by

    Reynaldo Germar
    This article aims to develop a new method for predicting business failures of construction contractors using long short-term memory recurrent neural networks (LSTM RNNs). The study finds that LSTM RNNs, which can learn sequential patterns from time-series data, achieve great success in predicting business failures within one year compared to traditional methods. Specifically, the model uses 12 financial ratios as inputs to predict failures, and achieves reliable predictions. However, the study notes there is still room for improving the LSTM RNN model's applicability and incorporating additional variables like managerial factors.

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    of 3

    In Partial Fulfillment of the Requirements for the Course

    CE505 – CONSTRUCTION METHODS AND PROJECT MANAGEMENT

    Published Journal Article Critical Review Sheet


    TITLE OF ARTICLE Predicting business failure of construction contractors using long short-term memory
    recurrent neural network(LSTM RNN)

    AUTHOR/S Youjin Jang , In-Bae Jeong , Yong K. Cho and Yonghan Ahn

    JOURNAL PUBLISHER Journal of Construction Engineering and Management

    YEAR PUBLISHED 2019

    ARTICLE’S PROBLEM STATEMENT


    Business Failure Prediction has been one of the most common problems of contractors. Since contractors are
    vulnerable to failures in the construction industry due to some factors like the type of project, project schedule,
    complexity of project and the risk in implementing construction activities. Construction contractors are increasingly
    likely to fail in their business because of the significant structural changes such as globalization, increased competition
    and regulation.

    ARTICLE’S MAIN GOAL / OBJECTIVE / PURPOSE


    Since contractors are more likely fail nowadays due to changes in the technological and global evolution this study
    aims to develop new solutions that can help in predicting business failures and help them address the problems before
    it ruins the project. It aims to avoid high probability of failures encountered by contractors.

    ARTICLE’S SPECIFIC GOAL OBJECTIVE/S


    The study aims to develop hybrid methodologies as an effort to improve prediction performance. Also another goal of
    this article is to predict business failure within one year with the use of  Recurrent neural network, which is a neural
    network with recurrent connections, has been developed in order to learn sequential and temporal patterns from time-
    series.

    ARTICLE’S SIGNIFICANCE
    This study considers that the characteristics of the construction industry are reflected in the value of the financial ratio
    of the construction contractors, and twelve financial ratios are selected as input variables : return on asset; return on
    equity; return on sales; current ratio; current assets to net assets; working capital to total asset; total liabilities to net
    worth; retained earnings to sales; debt ratio; working capital turnover; equity turnover; and total asset turnover.

    ARTICLE’S TYPE OF INQUIRY ( PUT  TO THE TYPE OF RESEARCH)


     Quantitative research
     Qualitative research 
     Quantitative and qualitative research or Mixed Method research

    ARTICLE’S RESEARCH DESIGN


    The current study utilized performance of the prediction model using long short-term and memory recurrent neural
    network, Feedforward Neural Network were used as a comparison reference in obtaining data for the research.

    2
    ARTICLE’S SPECIFIC DATA COLLECTED
    The current study gathered data from the respondent about their healthy observations and business failure
    observations when considering all the firm-year data. This study used a five-fold cross-validation approach when
    examining the prediction performance.

    ARTICLE’S METHOD OF DATA ANALYSIS


    This study used SMOTE + Tomek links, which is a hybrid method that combines the SMOTE (Synthetic Minority Over-
    sampling Technique) and Tomek links to obtain a balanced dataset. SMOTE is an over-sampling method where the
    minority class is oversampled to generate new synthetic examples. To measure the performance of the classification
    techniques the accuracy and F1-score are used.

    SUMMARY OF THE ARTICLE’S FINDINGS


    The business failure of construction contractors may cause not only sizeable losses to the economy but also another
    business failure to various stakeholders. Therefore, forecasting the potential business failure of construction
    contractors has always been an valuable issue for both researchers and practitioners. To make a robust model to
    enable the business failure prediction of construction contractors, this study applied long short-term and memory
    recurrent neural network which has a time step of three. LSTM RNN feeds the output of the previous time step to the
    input of the next step. LSTM RNN has achieved great success in various applications on sequential data because of
    the gate and memory mechanism. These results show that the LSTM RNN model is a reliable technique to forecast the
    business failure of construction contractors.

    CONTRIBUTION OF THE ARTICLE’S FINDINGS TO THE CURRENT LITERATURE


    The current study’s findings can be used to improve the understanding of future readers regarding the use of long
    short-term and memory recurrent neural network.  The proposed LSTM RNN model is a alternative to assist managers,
    investors, auditors, and government entities in predicting business failure of construction contractors which can be
    also adapted to other industry cases.

    IMPLICATION OF THE ARTICLE’S FINDINGS TO CURRENT PRACTICE


    This study proposed the business failure prediction model of construction contractors using LSTM RNN. Twelve
    financial ratios of the listed U.S. construction contractors were used to develop a model which can predict business
    failures within one year.

    AREA/S FOR FUTURE RESEARCH SUGGESTED BY THE ARTICLE


    There is still room for improvement for predicting performance and applicability of the LSTM RNN model for business
    failure prediction. The LSTM RNN model needs to cover a relatively long project period in the construction industry
    including managerial and economic variables. It also remains an interesting topic for further study to derive
    optimization producers to select proper group of variables and the corresponding parameter values.

    NAME OF STUDENT REYNALDO BONIFACIO GERMAR


    DATE SUBMITTED MARCH 19,2020
    LEVEL OF ASSESSMENT BEST BETTER GOOD POOR
    (PUT A  TO THE EXTENT OF 
    YOUR REVIEWSHIP)
    Percentage equivalent 99-100 90-98 81-89 75-80
    GPA equivalent 1.00 1.25-1.75 2.00-2.50 2.75-3.00

    2
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