An Empirical Study Of Financial Affairs Early Warning Models Based On The EVA

Nowadays enterprises are in the face of various risks, among which is the financial risk. When the financial risk accumulate to a certain extent, enterprises will run into financial crisis unless we take necessary or forceful measures. Thus an effective and applicable Financial Early-warning Model means a great deal to enterprises or those whose interests are concerned. The effectiveness of the Financial Early-warningModel lies in that it can predict variables and reveal the dangers and crisises that enterprises face timely and accurately. Owing to their limitations, traditional financial indicators can not be fully functional in Early-warning. As a new achievements evaluation indicator, EVA is superior to traditional financial indicators .After theoretical demonstration, the author make an empirical study of the Financial Early- warning Model in this article.Based on the research about the Financial Early-warningModel of enterprises and EVA home and abroad, the author elaborate the relative theories about the Financial Early-warningModel and the theoretical framework of EVA, analyze the feasibility of EVA's use in the financial early-wamingand then turn to the empirical part. In the empirical part, She sampled 138 enterprises from Shanghai Stock Exchange and Shenzhen Stock Exchange, adopt their financial statistics from 1998-2002 and use logical regression analysis method to filter 21 variables that are ready to be adopted by the model(including 7debt paying ability indicators,3 operation power indicators,6 erning power indicators,2growth power indicators and 3value creating ability indicators). She not only set up the Logistic Distinguishing Model, but also examined and certified the stability of the model. The results shows that among the 21variables ,ROA which reflects enterprises' earning power and EVA which reflects enterprises' value creating power ,are of great importance to enterprises' finance. and their accuracy of prediction reached 86.8% 2 years in advance. At last, She sampled 24 ST enterprises, examine and certify the feasibility and effectiveness of the model. The results demonstrates that the model are both effective and feasible, the model can predict the fiancial crisis 3years in advance, its accuracy of prediction arrived at 96.7% 1 year in advance.This thesis falls into 5 parts:The first part introduces the purpose of this thesis, the present condition of thestudy of the financial Early-warning and EVA domestic and international and the creative reviews in this article.The second part is the theoretical basis, including the relative theories about the Financial Early-warning Model and the theoretical framework of EVA.The third part examian and certify the feasibility of EVA's use in the Financial Early-warning Model by the combination of theoretical analysis and cases.The fourth part is the empirical study of EVA's use in the Financial Early-warning Model.The fifth part is the conclusion.The conclusion of this article is that EVA can't only be used to the Financial Early-warning Model, but also be more accurate than other financial indicators. Although EVA is superior to income indicators theoretically, as for the set-up of the Early-warning model, it can not replace income indicators. This can be explained by the definition of the financial plight.