Listed Companies' Financial Crisis Early Warning

The listed corporations of China are exposed in more complex market risk during the reform and development of china securities market. More and more corporations face the risk of financial distress and so much as quit the market. The finance distress or bankruptcy of public companies will not only influence the benefits of the owner, the creditor, the shareholders, the managers and the staffers of the company but also take widely society effect. Especially the bankruptcy of big corporation may fluctuate the whole securities market and region economy. So it is necessary to predict and prevent the finance distress. Finance distress occurs gradually in long period instead of occurs suddenly, which makes the prediction of the finance distress possible. The purpose of the paper is to establish exact finance distress prediction model with proper method.In this paper I review several financial early-warning models and theories those had been used in financial distress research.through comparing those shortings and excellents of these models and those theory basis I chose the logistic model to do some research in this field.About 180 manufacturing and synthetical companies witch haven been special treated because of the exceptional financial status and 749 healthy companies were taken as sample. After the analysis of the reason of finance distress and reference the early study result, fifty variables include some financial ratios, the cash flow and exterior circumstance variables were selected to predict finance distress. Then the prediction models were established using the method of binary logistic analysis. And the test was done too.The conclusion of the paper is that the finance distress is predictable. The prediction accuracy is more than 90 percent in the year before finance distress, and the accuracy is more than 70 percent in two or three year before finance distress. The earlier before the distress, the lower prediction accuracy. Some variables are useful for finance prediction, such as earnings per share, Assets Liabilities Ratio, Quick Ratio, Return on Equity, Financial Expenses plus profit to Current liability ratio, etc.