Ex Ante by Design: Leakage-Controlled Early Warning of Corporate Financial Distress Under China’s Special Treatment Regime
Early warning of corporate financial distress matters to creditors, investors, and regulators, and automated monitoring systems re-score listed firms after every disclosure. Under China’s Special Treatment (ST) regime, most designations are announced with the annual report that conventional one-year (k → k + 1) designs use as input, so part of their accuracy comes from information released with the outcome. We therefore build the timing constraint into the label: year-k statements predict a firm’s first ST or *ST (delisting-risk warning) designation in year k + 2, eligibility uses only information available at scoring, and we audit the remaining leakage channels. Using 13,702 A-share firm-years (2019–2023), we make three contributions. First, on the primary cohort (k = 2023), whose model and thresholds were selectable at scoring, a random forest reaches an area under the receiver operating characteristic curve (AUC) of 0.856 (95% CI [0.811, 0.899]), and tuned logistic regression and gradient boosting perform similarly. Second, frozen validation-year thresholds (2%, 4%, 15%) produce four review tiers whose ST rates rise monotonically, from 0.63% to 33.33% on the primary cohort (pooled: 0.76–25.88%); at equal review capacity, one profitability ratio finds almost as many events, so the tiers add a probability scale, not a better ranking. Third, every score carries archived row-level SHapley Additive exPlanations (SHAP) contributions and a replayable tier assignment.
Authors
- Xinfeng Dou (ORCID: https://orcid.org/0009-0009-9755-4176)
- Xuexin Huang (ORCID: https://orcid.org/0009-0006-0786-8955)
Institutions
- Nanjing Institute of Technology (CN)
Publication Details
- Journal
- Future Internet
- Published
- 2026-10-29
- DOI
- https://doi.org/10.3390/fi18110590
- Primary Topic
- Financial Distress and Bankruptcy Prediction
- Type
- article
- Field-Weighted Citation Impact
- 0.00