Liquidity Risk Measurement: Evidence From China's Listed Companies

In 2007 the subprime mortgage crisis of the financial sector broke out in the United States. Currently, the management of liquid assets became the most concerned issue of the commercial and investment banks. The Basel Committee on Banking Supervision has made a major adjustment of its Sound Practices for Managing Liquidity in Banking Organizations of 2000, and has published Principles for Sound Liquidity Risk Management and Supervision in June 2008. Subprime mortgage crisis in 2008 transferred to entities in the economic crisis. Subprime mortgage crisis can be seen to have impacted the overall economy. Beginning from the great fall of the stock market in the late 1980s, the problem of the governance of liquidity risk management had been put on the agenda. In recent years, particularly in 2007, the governance of liquidity risk has become a focal point. How to manage liquidity risk has become the most popular research topic. But there are not many researches in corporate liquidity risk. Therefore, we should study corporate liquidity risk in the methods of measurement to analysis the evolution of characteristics and influencing factors of liquidity risk, and apply it to the management of liquidity risk.In this paper, the author has opted to empirical analysis method and used the liquidity ratio as a method of measuring liquidity risk. All these are based on the research results of some scholars. We selected financial data in 2008 of 1373 non-financial services industry of listed companies in China, and analyzed 15 financial indicators that can reflect the corporate liquidity risk by using factor analysis and cluster analysis method. We select 9 indicators to measure business liquidity risk throughout factor analysis method and cluster analysis. After the composite score by factor and cluster analysis of liquidity risk in different sectors to make judgments, the authors got the following conclusions:(1) 9 indicators of concern can be used in measuring liquidity risk, namely Quick ratio, Liquidity Coverage ratios, Due debt ratio in cash, Ratio of cash to total debt, Ratio of current liabilities to total debt, Accounts payable turnover ratio, Average receivables turnover ratio, Inventory turnover ratio, Capital expenditure capacity to pay.(2) In the non-financial service industry, the level of liquidity risk in Real Estate, Construction and Transportation and storage industry is closed and the highest, and that of the Beverage and Medicine Biologic Products was the lowest. Followed by Wood Products, Electricity, gas and water production and supply industry, Dissemination of cultural industries are in turn reduced of liquidity risk. The liquidity risk of Electrical equipment, Paper printing, Textile and garment fur, Miscellaneous, Metal and nonmetal, Information technology industry, Mining, Manufacturing, Machinery Equipment Meter, Petroleum and Chemical Product Plastics Rubber, Conglomerate are close to the average level of the non-financial service industry. The liquidity risk of Agriculture, Forestry, Fishing and Hunting, Wholesale and retail and trade, Social Services, Food and beverage and pharmaceutical biological products are lower than the average level of the non-financial services industry. At the end of this paper is the summary of the research work, and a suggestion for further research directions.In short, liquidity risk measure and method of research are exploratory in this paper. Since there are very few liquidity risk researching literature at home and abroad for the non-financial service industry, the liquidity ratios and inter-industry differences in the level of liquidity risk are very valuable to daily risk management.