Research On Financial Distress Prediction Of The Listed Companies In China

In recent years, Research on financial distress has become important in the economic field. In initial stage,The academia only paid close attention to the financial indices which could predict financial distress. With the study deepen constantly; people began to find the deeper reasons that caused financial distress. Now, the focus of the research is the relationship between corporate governance and financial distress.The purpose of the research is to find the methods to improve their internal governance, which makes the companies health. And this study is important to the supervision departments,investors and the listed companies themselves.This research regards those special treatment firms as distressed firms. At first, the study analyzed the reasons that lead to financial distress, and then it contrasted and analyzed the healthy firms with the distressed firms in regards to governance characteristics. It adopted nine governance factors and seven financial factors to build Logit model respectively, and The result turn out to be:Model using governance factors can predict financial distress earlier than Model using financial factors.The evidence suggested that the percentage of state ownership and the ratio of outsiders are negatively related to the risk for financial distress, while the percentage of corporation ownership, size of the board, duality, are positively correlated to the risk for financial distress. The percentage of director ownership is positively related too, Diversification was not statistically significant.In the end, taking a realistic view of our country and the vast experience of western capitalism, some suggestions about corporate governance were given.