China's Listed Companies In Financial Distress Research Methods

With the development of Chinese securities business and the opening of financial market, listed companies take chances accompanied with challenges. Increase of foreign direct investment and expanding domestic investment demand provide more and more capital for listed companies, at the same time, they are under great macro environment in which economic is heading forward at a high speed. From the other side, the market gets more freedom that results in furious competition between companies. In such complex conditions, companies will involve different types of financial distress.In stock market, many people are related to listed companies' development, including stockholders, bankers, auditors, clients, the management team and employees. Direct or indirect huge loss will come once the company gets in financial distress. While recognizing that a good company steps into bad financial status is a relative long process, and before that the financial ratios give some signal, thus it is possible to predict the possibility of company's financial distress. This kind of information can help people related to take prompt action in order to against loss.In this research, time-dependent Cox model is used to analyze the listed companies' financial distress. Multi-period Logistic model and ordinary Logistic model are also considered. The data for this research collected from Wind database, including 1990-2006 about 1344 companies. Since finance industry is different from other industries, it is analyzed separately.The results of this research shows finance industry is a special field which is influenced by macro environment significantly, GDP and CPI working on finance companies in positive and negative direction. Analysis on non-finance industries, through the comparison on 3 types of model, multi-period Logistic model and time-dependent Cox model are better that ordinary Logistic model, and multi-period model can play well with less quantity of financial distress companies while time-dependent Cox model can show its prediction power with more numbers of financial distress companies.