Research On Financial Crisis Prediction Of China’s Listed Companies Based On Factor Analysis

With the current volatile market environment and heightened international competition,enterprises have to face increasing risks and crisis. The financial crisis is the most significantand comprehensive performance. Since Shanghai Stock Exchange and Shenzhen StockExchange were founded respectively in1990, the listed companies have made greatcontribution to the economy of our country. However, in recent years, as many companieswere involved in financial crisis and special treatment eventually, the performance of listedcompanies has been disappointing. Financial crisis affects not only the survival anddevelopment of enterprises but also the entire country’s economy. There are so manyenterprises which are in crisis mainly due to the insufficient attention to effective warning andprevention of financial crisis, which leads to the deteriorating financial situation. In fact,financial crisis is a gradual process which is predictable.In the increasingly fierce market competition, the financial crisis widely market, exist inall walks of life. If enterprise wants to get an impregnable position in the not only to havecrisis consciousness, more important is to find a effective way to avoid crises. With this senseof crisis strengthening, financial distress model arises at the historic moment. Currently thereare three models applied widely and relatively mature, they are Logistic regression analysismodel, multiple discriminant analysis model and the neural network model, but these modelshave their own disadvantages: neural network model is more complex, Logistic regressionanalysis model and multiple discriminant analysis model need to meet a series of assumptions,these disadvantages greatly limits the range of applications. Factor analysis model does notneed assumptions, and processing method is simple, so considering application range andoperation, this article chooses factor analysis model to research financial warning.This paper adopts empirical research method, select40listed companies which werefirst to be ST in2010,2011and chose its matching samples correspondingly. This paperestablishes five kinds of financial warning index system with24financial Indicators, and18financial indicators were selected to construct the factor analysis model using the Uinspection. The empirical results show that forecast accuracy reached90%one year beforethe company to be ST,40companies only four prediction error; Before two years to be ST, the accuracy of prediction are also reached82.5%, has a great warning effect; Before threeyears to be ST, the accuracy of prediction are also reached70%, to the financial crisis alsohave certain warning role. And with the year of financial failure is closer, prediction accuracyis higher and higher, it fully comply with the financial affairs warning rules andcharacteristics. Therefore, the factor analysis model has good prediction ability, using thefactor analysis model for the listed company to make financial warning has theoretical andrealistic significance.