A Study Of Warning System Against Financial Risk Of Listed Company In China Based On The Logit Model

Since the reform and opening-up of China, domestic and foreign markets are competing intensely and firms’internal management mechanism has emerged new problems continuously. The global financial crisis in2008and the global spread of the debt crisis in Europe since2010have brought in a serious management crisis to many listed companies. And the listed companies found themselves in management crisis firstly all appeared the sign of financial crisis. Financial crisis warning of firms is very important no matter for the enterprise itself or for investors and other individuals or organizations of interest related. Therefore, establishing an effective financial early-warning system has become China’s urgent problem, and has a significant meaning to the survival and development of China’s listed companies. Listed company is the highest form of modern company, the quantity and quality of them has a direct impact on the rise and fall of the stock market. In China’s stock market, company lists on the condition of continuous profit of the last three years. However, for the companies already listed, they may come out loss because of poor management or other reasons. So, how to analyze early, determine and predict whether listed companies begin to face financial difficulties, business failure or bankrupt risk is the concerns of majority of investors. Setting up and establishing financial early-warning model to track, monitor and detect financial crisis signal early, can not only provide scientific methods and reliable basis for investors and creditors (including banks) determining the quality and operation results of listed companies, but also allow the operators to take effective measures to improve business conditions in the embryonic stage. In this paper, based on reading and researching the domestic and foreign financial early-warning theory and research, combined with the current development of China’s listed companies, I am trying to explore the applicability of the financial early-warning model in China’s listed companies. Proposed financial early-warning method based on the Logit model, selected180listed companies as sample and filtered a number of commonly used financial indicators, I established financial early-warning model of listed companies through rigorous empirical data testing, result shows that the design of early-warning model is valid.