Learning a board Balanced Scorecard to improve corporate performance

  • Authors:
  • Germán Creamer;Yoav Freund

  • Affiliations:
  • Stevens Institute of Technology, Castle Point on Hudson, Hoboken, NJ 07030, United States;University of California, San Diego, Computer Science Department, 9500 Gilman Drive, La Jolla, CA 92093-0114, United States

  • Venue:
  • Decision Support Systems
  • Year:
  • 2010

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Abstract

The objective of this paper is to demonstrate how the boosting approach can be used to define a data-driven board Balanced Scorecard (BSC) with applications to S&P 500 companies. Using Adaboost, we can generate alternating decision trees (ADTs) that explain the relationship between corporate governance variables, and firm performance. We also propose an algorithm to build a representative ADT based on cross-validation experiments. The representative ADT selects the most important indicators for the board BSC. As a final result, we propose a partially automated strategic planning system combining Adaboost with the board BSC for board-level or investment decisions.