Research On Financial Early-Warning System Of Listed Company In China

In recent years, by reason of the aggravating of external market competition and internal poor management, it is common for companies to fall into financial crisis in the world, some of which even go bankrupt. As for listed companies in China, with the joining into WTO of our country, they encounter challenge of multinational companies abroad. In order to survive and develop, listed companies in China must establish financial early-warning system. It can correctly forecast and prevent financial crisis for listed companies, monitor the quality of listed companies and the risk of security market for government management departments, protect normal rights and interests of investor and creditor, reduce shock of security market and promote the benign development of listed companies, which is helpful as regards the security both the economy and society.In reality, the financial state of listed companies in China is not good overall, examples of which are listed companies whose shares are under special treatment and terminated in the stock market. Until March, 2005, 165 listed company shares are under special treatment and 28 shares are terminated in the stock market. Therefore, establishing financial early-warning system is critical for listed companies in China to survive and develop.This paper analyzes financial crisis situation and application situation of financial early-warning system in China with the guidance of basic theory of financial early-warning system and science theories of accounting, financial management, focusing on the establishment and perfection of financial early-warning system of listed companies in China, using the normal analysis and demonstration analysis methods. The analysis shows that financial situation of listed companies in China is not good generally, among which about 11% shares are specially treated at present. Though some other shares are not specially treated, they show symptoms of financial crisis in some aspects. Therefore, listed companies in China are essential to establish and perfect financial early-warning system.This paper researches on the establishment of financial early-warning system itself and the perfection of the environment of the system. About the establishment of the system itself, this paper shows how to establish the financial early-warning systemin four aspects: organization mechanism, operation mechanism, target system and analysis methods. About the perfection of the environment of the system, this paper shows four aspects: the perfection of corporate governance; the perfection of related law system; the perfection of the quality of financial information; the perfection of interior controlling system.