| With increased economic growth and the more and more fierce market competition, China is right now at the moment of economic transition. As for listed enterprises, they also encounter a huge transformational challenge. Therefore, it is a necessity for listed corporations to strengthen management as well as avoid financial risks. If they fail to manage well, the listed corporations will face severe consequences such as the China Securities Regulatory Commission (CSRC)’s exit mechanism, including special treatment, suspension or termination. Especially in recent years, the environmental protection industry as a new-fledging industry faces the issue about development and evolution. It is imperative to monitor their financial health in order to timely detect and prevent financial risks. In this sense, establishing financial forecast warning model is of great value to shareholders of listed companies, managers, investors and significant others.This article starts with introducing the research results from both domestic and foreign scholars who investigate enterprise financial forecast warning model. In addition, the article explored both the theory and the model of financial forecast warning system. Based on previous literature review over financial forecast warning model, this thesis builds an index of financial forecast warning system. In order to establish a more effective and practical forecast warning index and model, the second part of the thesis analyzes the status quo and characteristics of environmental protection industry as well as the features and causes of financial risks involved in the environmental protection industry. After connecting the characteristics of the environmental protection industry with interviews of 10 experts, the third part selects the basic indicators of the environmental protection industry, and conduct a primary statistical analysis for the significance of the original selected index. By means of screening the original selected indicators, the fourth part ultimately selects the sample of 50 A-share market listed corporations based on the classification of sectors. The sample is mainly composed of equipment manufacturers who are engaged in environmental governance. The quarterly financial reports ranging from 2010 to 2014 of those corporations are employed to calculate the relevant financial indicators. After conducting logistic regression analysis, the findings are provided and discussed from the perspective of management science, environmental economics, securities investment and environmental protection industry. The fifth part selects some representative listed corporations as case study. Moreover, the financial forecast warning system is established to predict financial risks.The relevant countermeasures and suggestions for financial risk prevention in environmental industry are discussed in the sixth part.The article makes initial efforts to establish the financial forecast warning index and model, which can be applied to the environmental protection industry. More importantly, the study conducts logistic regression analysis. The empirical results show that the tested financial forecast warning model is in line with the characteristics of the environmental protection industry and the financial indicators, which are obtained via screening, demonstrates a strong correlation. Therefore, financial forecast warning model can effectively distinguish the financial status of enterprises. Through testing the model, the fitting degree can reach 98%. On the other hand, the model has been validated in certain listed corporations, which further proves that the model is practical and it can be applied to enterprises to manage their financial risk. |
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