Study On The Financial Distress Based On Corporate Governance Structure

Research on the financial plight of the financial research in the company has been an important field of study. Scholars at home and abroad are trying to find the best early-warning model of financial distress to improve the accuracy of the forecast. At present, most of the research on the financial plight focused on establishing forecasting model through the financial indicators to analyze. And the analysis of the financial plight which based on corporate governance more made the financial indicators as control factors to analyze the relations between corporate governance and financial difficulties of company, and does not reflect that the introduction of corporate governance can or cannot improve the accuracy of financial distress early warning model.From Fitzpartrick (1932) single-variable analysis of the financial plight as the beginning of the study, and recently the introduction of neural network research, study of the financial plight has made great progress. But there are still a number of shortcomings. This article holds that the main shortcomings in the following aspects: 1. Because of data limitations and inadequacy of sample size, most of the research group used forecasting data instead of new test samples to test the accuracy of the model. This exaggerates the predictive ability of the model. 2. Selection of forecast financial variables was made by a lot of experience or the results of previous studies, which suitable for China's national conditions did not make a major breakthrough. 3. Most of the research was done when the company would be ST in two years. Forecasting in the case of that company made a loss for a year to determine ultimately whether it would be ST, which will overestimate the predictive ability of the model.On the basic of reover the classic literature of study on financial Distress, summarized and evaluated the results we have now, selected the companys that were ST in the year 2007 and 2008,there are 70.And select the comparison companys that have approaching IPO time and core business.Then devide the companys into two groupe. One group is used to establish the early warning model, another is used to test the accuracy of model.Compute therity-fore financial rates.Use the Wilcoxon test and Kolmogorov-Smirnov test. Excluding the nine financial rates that did not have significant difference. Use the inter-variable analysis to the last twenty-five rates,remove the financial rates with high relevance.The remaining rates are x1, x5, x12, x21, x27, x31.Then use the forecast data estabilish a Logistic model which has a accuracy of 72.14%.Then use the non-parametric test to the seven variables reflect corporate governance structure and ownership structure, we can seen from the non-parametric test results that the audit opinion has the best significantly ,the following are duality of chairman and CEO,Executives share,scale of the borad,the other three do not have significant difference.We do Logistic Regression Model use the four rates reflect the corporate governance structure and ownership structure of the company that have significant difference and the financial rates,the accuracy goes to 75%. Research shows that corporate governance factors will be incresae accuracy of the model.Finally come to the conclusion: corporate governance structure and ownership structure of the company related to the probability of financial Distress,and the model conclude corporate governance variables is better than that conclude only financial rates, so This provide more reliable analysis for us to judge whether the company has the probability of financial Distress.We can see from the non-parametric test that contains only corporate governance structure:only the Audit opinion has a significant difference between the company of ST and non-ST.Seen from the regression results: Audit opinion also has a very strong power to predict whether the company is in financial Distress.So we can not use only the corporate governance structure and ownership structure of the company when study the financial Distress; we should taken into account the company's financial position, operating results and cash flow to determine the integrated.We can also seen from the regression results that the wald Statistics of duality of chairman and CEO is higher in the ownership structure,which indactes that duality of chairman and CEO has the Impact on corporate performance and increase the possibility of the Companies go to financial Distress; The number of independent directors is not in the Logistic model,this conform to the fair that the new Company Law did not restrict The number of independent directors.The rates that reflect the company's financial position, operating results and cash flows are all concluded in de model, that imply we should focus on the all-round development of the .