Listed Companies' Financial Risk Of Failure Early Warning Model And Its Empirical Analysis

The prediction of corporation financial failure is a major difficulty in financial study. Financial failure is the threat not only to the existence of the corporation, but also to the investors , creditors and the interest of the country . With the development of our stock market, the effect of financial failure is increasing steadily. To forecast the failure, can warn investors the risk of loss. Financial institutions such as banks can decrease the risk of bad debts. Auditors can alertly avoid drawing the wrong conclusion. Finally, the manager of the corporation will be forced to take action to improve the financial state of the corporation.On the basis of the Edward I Altman's Z-score discriminate model which is widely used in the west, this article establishes a new predicting model of corporation financial failure by adopting principle components analysis and the modern theory of Financial Management. The new model uses all the financial ratios that can predict financial failure, and avoid the loss of financial information. The new model has a meaning to the monitor of stock market and the management of the companies .