Advancing Credit Rating Prediction: The Role of Machine Learning in Corporate Credit Rating Assessment

Accurate corporate credit ratings are essential for financial risk assessment; yet, traditional methodologies relying on manual evaluation and basic statistical models often fall short in dynamic economic conditions. This study investigated the potential of machine-learning (ML) algorithms as a more precise and adaptable alternative for credit rating predictions. Using a seven-year dataset from S&P Capital IQ Pro, corporate credit ratings across 20 countries were analyzed, leveraging 51 financial and business risk variables. The study evaluated multiple ML models, including Logistic Regression, Support Vector Machines, Decision Trees, Random Forest, Gradient Boosting (GB), and Neural Networks, using rigorous data pre-processing, feature selection, and validation techniques. Results indicate that Artificial Neural Networks (ANN) and GB consistently outperform traditional models, particularly in capturing non-linear relationships and complex interactions among predictive factors. This study advances financial risk management by demonstrating the efficacy of ML-driven credit rating systems, offering a more accurate, efficient, and scalable solution. Additionally, it provides practical insights for financial institutions aiming to enhance their risk assessment frameworks. Future research should explore alternative data sources, real-time analytics, and model explainability to facilitate regulatory adoption.

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Publication Details

Journal
Risks
Published
2025-06-17
DOI
https://doi.org/10.3390/risks13060116
Citations
2
Primary Topic
Financial Distress and Bankruptcy Prediction
Type
article
Field-Weighted Citation Impact
7.82

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article

Advancing Credit Rating Prediction: The Role of Machine Learning in Corporate Credit Rating Assessment

Leonardo Fernando Cruz Basso, Nazário Augusto de Oliveira
2 citations
Risks
Financial Distress and Bankruptcy Prediction
7.82
article

Advancing Credit Rating Prediction: The Role of Machine Learning in Corporate Credit Rating Assessment

Leonardo Fernando Cruz Basso, Nazário Augusto de Oliveira
article en
2 citations

Abstract

Accurate corporate credit ratings are essential for financial risk assessment; yet, traditional methodologies relying on manual evaluation and basic statistical models often fall short in dynamic economic conditions. This study investigated the potential of machine-learning (ML) algorithms as a more precise and adaptable alternative for credit rating predictions. Using a seven-year dataset from S&P Capital IQ Pro, corporate credit ratings across 20 countries were analyzed, leveraging 51 financial and business risk variables. The study evaluated multiple ML models, including Logistic Regression, Support Vector Machines, Decision Trees, Random Forest, Gradient Boosting (GB), and Neural Networks, using rigorous data pre-processing, feature selection, and validation techniques. Results indicate that Artificial Neural Networks (ANN) and GB consistently outperform traditional models, particularly in capturing non-linear relationships and complex interactions among predictive factors. This study advances financial risk management by demonstrating the efficacy of ML-driven credit rating systems, offering a more accurate, efficient, and scalable solution. Additionally, it provides practical insights for financial institutions aiming to enhance their risk assessment frameworks. Future research should explore alternative data sources, real-time analytics, and model explainability to facilitate regulatory adoption.

RisksVol. 13(6)
Universidade Presbiteriana Mackenzie (BR)
Universidade Presbiteriana Mackenzie
Openalex Percentile: Top 3%
Financial Distress and Bankruptcy Prediction
7.82
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