An Empirical Study On Asset Liquidity And Financial Distress Of Listed Corporations

According to the statistical surveys of developed countries, nearly 80% of bankruptcy enterprises are profitable. The main reason of their failure is usually the deficiency of cash instead of operational loss. Therefore, the lack of assets liquidity can be regarded as the important reason for financial distress of enterprises. While scholars abroad and domestic often research on the financial distress through financial conditions of enterprises in terms of debt-repaying capabilities, profit-gaining capabilities, operational capabilities and growing capabilities. Based on the dataset acquired from financial statements of listed corporations, this article instead will try to use the traditional liquidity indexes combined with the cash flow related liquidity indexes, by the use of factor analysis method together with Logit method, in order to make research into the financial distress pre-warning of two years. Considering the difference of industries, this article will also make an industry- specific analysis. The empirical results indicate that the models built up have satisfactory predicting accuracy, and the industry-specific results are more accurate than the overall research. In conclusion, this article finds that under the current accounting systems and guidelines, the financial statement can offer us a large amount of valuable information in order to predict financial distress.This research is divided into four parts:The fist part introduce the definitions of liquidity and financial distress, together with their inherent relations. At the same time, it introduces the measuring indexes of liquidity, and points out the research points.The second part is the research method and its design. In our research, we make use of the factor analysis and Logit method. Furthermore, we introduce the sampling method, dataset origin, and the selection of liquidity variables together with the disposal of data.The third part is the empirical analysis. It contains of overall research and industry-specific research. The models got through factor analysis method or Logit method both show good prediction accuracy, moreover, the industry-specific results are better.The last part summarizes the empirical results and its practical applications, and brings up some limitations and expanding directions of this research.