City Manager Compensation and Performance: An Artificial Intelligence Approach

2. Background: Neural Network In Accounting Research

Artificial neural network is widely used in accounting literature. Previous researchers use neural networks to predict takeover targets (Cheh, et al., 1999), earnings (Charitou & Charalambous, 1996), and pricing of initial public offerings (Jain & Nag, 1995). More recently, using 178 mergers from 1996-2001, Shawver (2005) developed and tested neural network models for predicting bank merger premiums. The evidence shows that a neural network methodology provides more explanation between bank merger premiums and financial variables in the model than a traditional regression model. The author attributes the results to the ability of a neural network model to recognize patterns in complicated financial relationships.