Study On The Financial Distress Prediction Of Listed Companies In China

Generally speaking, financial distress is usually referred to as a state in which an enterprise's financial circulation is not able to continue to run normally or is stagnated because of the influence exerted by managerial strategy, financial operation, production marketing and other factors which can not be avoided. Early or slight financial distress in an enterprise may display as the loss of in a short term or the difficulty in the capital turnover. If the condition can't be improved, it will make the financial condition go from bad to worse, bringing up the breakout of the fund chain link and the loss of the debt-paying ability, leading to financial crisis and even bankrupt. Making a research on the financial distress prediction can not only perfect the relating theories, but also can be beneficial to guide the administrators to improve their managerial ability, standardize the financial operation, discover the latent crisis early and avoid or weaken the damage caused by financial distress. Meanwhile, the research can also help the investors, creditors and other benefit relevance parts analyze the enterprise's financial condition, predict its prospect of development and enhance the decision-making more timely, more scientific and more effectively.Using the domestic and foreign existing research results for reference, the paper takes the listed companies in China as the study object, and defines the companies special treated because of their abnormal financial condition as the financial distress companies together with the connotation of financial distress and the special system background of our country. On the basis of statistically analyzing the present situations of the listed companies in financial distress from the aspect of manifestation, year distribution, industry distribution, local distribution, scale distribution and so on, the paper analyzes the internal and external affecting factors causing financial distress in our country's listed companies. Then the paper constructs financial distress monitoring indicator system by choosing the financial playing their roles as different signals and the non-financial indicators reflecting governing structural and behavioral features. On this basis, the paper selects the listed companies in manufacturing which suffered form financial distress from 2001 to 2005 and their corresponding companies which haven't suffered from financial distress as samples. With the help of companies'public financial data, non-financial data and other relevant data, after variable screening, the paper constructs the logit models of the year of T-3 and the year of T-2 respectively by applying logistic regression method, and also makes the arrangement of ranking for some indicators according to their importance in the financial distress prediction.The paper draws the following conclusion in the research: Firstly, the formation of the financial distress is a cumulative and gradual process, which is influenced by various factors and expresses diverse signals. Secondly, generally speaking, the financial data of our country's listed companies show a strong usefulness in the financial distress prediction. Relatively, the assets operation efficiency indicators and the profitability indicators have stronger prediction ability in the long-term prediction, while the debt-paying ability indicators play a more vital role in the short-term prediction. Thirdly, it's effective to give the non-financial indicators a consideration in financial distress prediction. The indicators which reflect behavior characteristic possibly have higher information content compared to the ones which reflect structure characteristic. The ratio between fund taking property applied to represent the shareholders'behavior characteristic in this paper not only passes the notable test, but also shows a strong forecast ability in the models both of the year of T-2 and the year of T-3. Finally, our country's ST (special treatment) system has effect in the aspect of reflecting healthy degree of a listed company's financial condition. Although this system puts particular emphasis on the inspection of the profitability of listed companies, the result of manufacturing listed companies'single variable T-test demonstrates that there is sharp difference between ST companies and non-ST companies in the aspect of the asset operation efficiency, the debt-paying ability, the cash flow and governing behaviors. At the same time, the nearer it comes to the year of ST, the more obvious the difference will be.