Financial Early-warning Model And Its Empirical Research

Financial crisis early-warning is the core of the financial pre-warning. Listed companies as a typical modern enterprise, have a relative effective management system and more completed financial accounting information explore. Therefore as good example of the financial crisis early warning model, they are representative and practical.Because companies face more and more worldwide competitions, some of them will fall into crisis and will go bankrupt even worse. Financial crisis will badly affect economy from various aspects. Therefore, effectively forecasting financial difficulty becomes the essential step for commercial bank to manage credit risk and also for stock investors to reduce the business risk for their investment.According to companies' financial reports, financial ratios or models applied, through statistical methods, financial crisis early-warning system analyses companies' ability of repaying debts and payoff, so it predicts probability of companies' financial deficit. To establish a financial crisis early-warning system is an effective way to prevent and control financial failures. It had been known in foreign and Chinese scholars. This dissertation will mainly focus on failed listed companies as research objects and investigate a large number of related literatures. Based on plenty of literature reviewing and considering the characters of Chinese security market, ST and ~*ST are defined as failure. After collecting various cases and data from failed listed companies, the research was conducted on pre-warning of the failure of listed companies.On the analysis, this dissertation anatomizes cases of ST stocks, and analyzes reasons of failure from the following three aspects: Industry factor, stock frame, intendance mechanism, business diversification and investment. Then considered both reasons and cases, the characters of failure in listed companies was summarized as deterioration of liquidity and leverage, profitability, activity, growing ability, structure and cash flow. Such results are very helpful in choosing variables.Based on the data acquired from listed corporations, this article analyzes financial character of difference industry first. The result revealed that the financial character between difference industries is distinct. So the pre-warning models must be built up for difference industry, by the use of factor analysis method together with the logistic method, in order to make research into the financial distress pre-warning of two years. The results indicate that the models built up have satisfactory predicting accuracy. In conclusion, the article finds that the financial characters between difference industries must be considered. Cash is blood of companies' body. It is a crucial factor in company control that managers and inventors focus on. The reason of many companies' failure is the lack of cash. There is much realistic meaning in the study of financial crisis early-warning system based on cash flow.