A Research On The Financial Distress Based On Corporate Governance

Research on financial distress is an important issue in the corporation management. The financial status affects the corporation's running directly and is related to the survival and development of the corporation. The study on financial distress, especially on prediction of financial distress appears to be very important.Basing on the kinds of theories about corporate governance and financial distress, combining the actual circumstance of the listed companies, this paper studies on the financial distress considering corporate governance factors through the method of the theories analysis together with empirical analysis. This paper investigated the influence of corporate governance variables on financial distress, using binary logistic regression based on 39 listed companies that suffered financial crisis and 39 normal companies. And we also discussed the prediction accuracy of the model with corporate governance variables.The main results are shown as follow:Companies that suffered financial crisis are different from the normal ones in some financial indexes; the model is valuable on prediction effect only using the financial indexes; financial variables show a fluctuation on time, while corporate governance variables behave as consistent variables; corporate governance variables affect the probability of a company falling into financial distress; with the inclusion of corporate governance variables, the model shows a better prediction effect. The conclusions of this paper will play an important role on the amelioration of financial distress forecasting and corporate governance.