Research On Financial Crisis Prediction Of China's Listed Companies

With the current volatile market environment and heightened international competition, enterprises have to face increasing risks and crisis. The financial crisis is the most significant and comprehensive performance. Since Shanghai Stock Exchange and Shenzhen Stock Exchange were founded respectively in 1990, the listed companies have made great contribution to the economy of our country. However, in recent years, as many companies were involved in financial crisis and special treatment eventually, the performance of listed companies has been disappointing. Financial crisis affects not only the survival and development of enterprises but also the entire country's economy. There are so many enterprises which are in crisis mainly due to the insufficient attention to effective warning and prevention of financial crisis, which leads to the deteriorating financial situation. In fact, financial crisis is a gradual process which is predictable.Foreign scholars have begun to research on financial crisis of enterprises since 1930s, and the research results are relatively mature. However, in China, scholars have not begun to explore this area until 1990s, in which the research is relatively late, therefore, data and cases are insufficient, and research results are relatively poor. Today, whether at home or abroad, the research of financial crisis still have many problems and limitations, for example, lack of theoretical base, research on a certain type of enterprises, under attention to the precautions, and so on. Many foreign research results are not appropriate to China's listed companies because of China's special capital structure, ownership structure and political and economic environment, so it is urgent to develop further research on financial crisis by combining the actual situation of China's listed companies.In this paper, China's listed companies in the manufacturing sector are chosen as research objects. Then, in strict accordance with the standard of the same industry and less than 5% differences of assets scales, we choose 40 ST companies which can be successfully matched from 82 ST companies in the manufacturing sector, and find 40 non-ST manufacturing companies whose assets scales are the most close to them respectively. On the basis of referring to the extensive research literatures, considering the actual situation of China's listed companies in the manufacturing sector, we choose seven financial indicators from the seven respects of the solvency, profitability, capital structure, operations, market income, growth and cash flow. After a brief analysis on China's listed companies in the manufacturing sector, 30 pairs of listed companies are randomly selected from the samples as the sample estimate group. And then, we use SPSS, Excel and other software by principal component analysis to elect the principal components and analysis them. Next, the prediction model and critical areas are set up to determine whether listed companies in China's manufacturing will be financial distress. Finally, we define the remaining 10 listed companies in the manufacturing sector as the test sample group to test the established model. The empirical results show that the model in this paper can predict the financial crisis of listed companies in China comparatively scientifically and feasibly.