The Study Of College Financial Distress Causes And Warning

Since 1999, Chinese universities have implemented the expansion enrollment policy; as a result, their financial liability increased dramatically. And with repays time approaching day by day, some "hiding crisis" starts to come out and universities's financial risk and difficulty have been brought into focus. Although the problem exists commonly in our universities, the research on financial distress is still limited to that of the enterprises in our country. Having based on the questionnaire survey of some universities' financial distress, the dissertation summarized the characteristics and the indicator system of these universities's financial distress, which are different from that of the enterprises. And the dissertation inspected the relationship between financial distress and loan. The dissertation also inquired the deep reasons for universities' financial distress and proposed countermeasures to eliminate the financial difficulties and put forward the warning mechanism of financial distress by employment of finance management and non-for-profit-organization theories.The dissertation was divided into six chapters. The main coverage and conclusion of each chapter is as follows.The first chapter proposed the research question. It explained the logical thinking, research significance and innovation of the dissertation. It also defined the university's financial distress of this dissertation based on the domestic and foreign scholars' research.The second chapter reviewed the related literature. The domestic research on financial distress started late, the university financial distress in partiucular; whereas research abroad has been mature. This dissertation analysed the literature from the reasons, finance warning mechanism and the countermeasures. And it determined two directions of the research: the reasons of financial difficulties and the warning mechanism.The third chapter is about system background analysis. Firstly, it analysed the China financial policy and the university enrollment policy. Before 1999, the principle of our university's financial management insisted "expenditures on the basis of income, the balanced revenues and expenditures". The university expansion enrollment policy in 1999 and the government's positive financial policy had a large impact on the loan of university. Secondly, it concluded that the governance of China's university had a large influence on the appraisal of teaching. Lastly, the dissertation contrasted Chinese and American University's financial management systems. It discovered that the common characteristics of both are they have the same channel of financing. But the American University's loan has the guarantee and the risk control is very strict.The fourth chapter is about the performance and theoretical analysis of university finance distress. Firstly, it defined the definition of university financial distress and its performance. Secondly, using the theory of finance control, corporate governance, and capital structure and relating to the third chapter, it proposed the research supposition of financial distress. Based on the analysis, it was conclude that the main reason of university financial distress is large loan. Therefore, the dissertation analysed the reasons of university financial distress and the warning mechanism in the fifth and sixth chapter.The fifth chapter is to confirm the reasons of financial distress using empirical research: the amount of loan; the channel of financing; the decision-making of university's infrastructure facilities construction; the standard of school building; the university's scale.In addition, the governance to university's management, the standard of teaching appraisal, the amount of money government gave to the university's infrastructure construction, the financial accounting system; the management of university internal control and so on is also the reasons of university financial distress.The sixth chapter is the empirical research on the university warning mechanism. The dissertation gained the financial ratios of 2003 to 2007 through questionnaire. And using the method of Logit regression, it forecast whether the university would have the financial difficulty in the current year. The empirical result indicated that some financial ratio including the short-term debt, long-term debt, capital ratios and cash flow etc. can demonstrate the possibility of universities' falling into finance difficulty. But the characteristic of the university's financial situation needs to be considered when this approach is used.The seventh chapter is the conclusion of this dissertation. It proposed some countermeasures to prevent universities from falling into financial difficulty. Also it pointed out the deficiency of this research and direction for further studies.The innovations are as follows: the first, the theory of enterprise finance distress was applied in analysing the university's finance distress.Secondly, the dissertation confirmed the reasons of financial distress by using empirical research.Finally, the dissertation inquired the warning mechanism of financial distress by employment of finance control theory.