A Study On Financial Early-warning System Of Chinese Listed Companies

Fourteen years ago, Shanghai Stock Exchange was founded on Dec. 12,1990.Our stock market has been growing rapidly since then and has already become animportant part of our national economy. Listed Companies, as the footstone of stockmarket, do need excellent business operations and outstanding achievements as thesolid bases for the activeness of stock market, all the related personnel have raisedhigher requirements against the operation status of listed companies and have a betterunderstanding of financial crisis. On Mar. 16,1998, China securities regulatorycommission issued Document No.[1998] 6 "Notice of Special Treatment againststocks of listed companies in abnormal conditions", asked Stock Exchange to takespecial treatment(Abbreviated as ST) in stock exchange against companies in"abnormal operation conditions". That was an alarm for the listed companies inShanghai and Shenzhen.Thus in this thesis, financial distress is defined as being forced to take specialtreatment because of "abnormal financial status". Taking China's listed companiescharacteristics into consideration, this thesis reviews the study status both in Chinaand in abroad. Then, under the guidance of the enterprise early-warning theory, thethesis brings forth a dynamic listed companies financial early-warning system, whichis based on the following several sub-systems: the early-warning analyzingorganization sub-system, the financial information collecting and transferringsub-system, the financial risk analyzing sub-system, the financial risk managingsub-system. The financial early-warning system takes financial distress early-warningmodel as precaution function, and it emphases on the completeness and internalcoordination of the early-warning system. After summarizing the variance selectionand researching techniques and using Logistic model, the early-warning model isconstructed. This model is evaluated by an empirical study which taking 28 ST andnon-ST, all together 56 industrial companies, as samples. Also the limitation andfurther improvement of the research are pointed out.