The Positive Study Of Financial Distress Prediction Of Listed Corporatons In China

The listed corporations of China are exposed in more complex market risk during the reform and development of china securities market. More and more corporations face the risk of financial distress and so much as quit the market. The financial distress or bankruptcy of public companies will not only influence the benefits of the owners, the creditors, the shareholders, the managers and the staffers of the company but also bring widely society effect. Especially the bankruptcy of big corporation may fluctuate the whole securities market and region economy. So it is necessary to predict and prevent the financial distress. Financial distress occurs gradually in long period instead of occurs suddenly, which makes the prediction of the financial distress possible. The purpose of the paper is to establish exact financial distress prediction model with proper method.About 180 manufacturing and synthetical companies which haven been special treated because of the exceptional financial status and 749 healthy companies were taken as sample. After the analysis of the reason of financial distress and reference the early study result, fifty variables include some financial ratios, the cash flow and exterior circumstance variables were selected to predict financial distress. Then the prediction models were established using the method of multivariate discriminant analysis, principal component analysis and binary logistic analysis. And the tests were done too.The conclusion of the paper is that the financial distress is predictable. The prediction accuracy is more than 90 percent in the year before financial distress, and the accuracy is more than 70 percent in two or three year before financial distress. The earlier before the distress, the lower prediction accuracy is. The prediction accuracy is similar to the multivariate discriminant model and binary logistic model. Some variables are useful for financial distress prediction, such as earnings per share, assets liabilities ratio, quick ratio, return on equity, financial expenses plus profit to current liability ratio, etc.