Research On The Improvement Of The Pre-warning Model For The Listed Companies' Financial Distress

In recent years, with the rapid development of China's securities market and the further reduction of the access threshold, more and more enterprises obtain the listing qualification. On the one hand, the listed companies can obtain wider financial channels and better development opportunities. On the other hand, the listed companies are also facing more intense competition and greater market risk. Many listed companies were special treated because of spoiled financial status every year. In this paper, we define those companies as the financial distress companies. Once the listed companies into financial distress, it will bring huge losses to investors, operators, owners and other stakeholders. Therefore, it is quiet important to build an early warning model and improve its predictive abilities to avoid financial distress effectively.Since the thirtieth in the last century, scholars have begun ongoing research on the pre-warning of financial distress. According to the different early warning indexes constructed a variety of financial distress prediction models. This paper proposed four hypotheses based on the corporate governance theory and try to add the information of corporate governance and the audit opinion into the pre-warning index systems. Then, filter the pre-warning indexes strictly by significance analysis and factors analysis. We constructed the purely financial pre-warning model and the integrated model including the information of corporate governance and the audit opinion inside by multiple logistic regression method. Finally, we test those models'predictive ability and make a comparative analysis.The results of this study show that: Firstly, join the corporate governance variables and the audit opinion can enhance the pre-warning model's predictive ability. Secondly, the more stronger of the solvency,profitability, growth capacity and operational capacity ,the less the financial distress likely. Thirdly, improve the proportion of the largest shareholder can reduce the corporation's probability of the financial distress. Fourthly, relatively high proportion of the management shareholding means lower probability of financial distress. Finally, audit opinions can regard as a financial distress predictor, greater probability of financial distress to companies which obtained non-standard audit opinion.