A Research On Identification Of Fraudulent Financial Statements Of China's Listed Companies

Fraudulent financial statements(FFS) had disturbed the regular economic order, and led to credit crisis in the market. Many researchers had made great research achievements in the motivation, performance and management characteristics of companies with fraudulent financial statements. At the same time, some researchers had done lots of data-processing work with mathematical models to identify and forecast companies with fraudulent financial statements; also great achievements had been achieved.Based on predecessors'achievements, the author introduced classification and regression trees model (CART) in the research of fraudulent financial statements of china's listed company. In this paper, the author had established linear multivariate discriminant analysis model, Logistic model and classification and regression trees model to identify fraudulent financial statements of china's listed companies, and also made a comparison among the three models. The results showed that the three models had achieved favorable results, especially the CART model; this research got an important conclusion that the ratio of Retained Earnings to Total Assets be equal to 2% is a significant cut-point between FFS Companies and None-FFS Companies, which is proved to be stability and applicable by data of china's listed companies extracted from 2000 to 2007.This paper included four chapters: the former two chapters put forward the background of this research, summed up achievements and trends home and abroad, discussed the theoretical basis and performances of companied with fraudulent financial statements, as well as the definition of fraudulent financial statements. All of these were the theoretical basis for the coming empirical research; the next two chapters were empirical research. In this part, research samples and financial ratios were chosen firstly and three research models were introduced, then three identification models were established for the identification of fraudulent financial statements of china's listed companies. The last part was a conclusion of this research and suggestion for further research.