Research On The Correction And Development Of Listed Companies’ Forewarning Model Against Financial Risks

With the development of the capital market, the listed company are facing fierce competition in the market. Many companies ignore the financial risk of prevention and controlling. More and more companies are in deeply financial crisis, even bankruptcy. Risking is inevitable, as the risk of a ring; the financial risk is equally inevitable. However, people can measure the size of financial risks that are faced by the Company, which made warning, targeted preventive measures. People require an appropriate warning model of financial risk Altman made the first multi-variable linear model in1968. With the gradual improvement of Chinese capital market, capital market gradually expanding the scale, the number of samples which can be studied by our scholars has continued to increase, and they also made a lot of early warning models.However, the warning effect of rigorous model is not ideal. Because the environment of capital market has changed. Some models were simply computed with the least squares method, which has not been rigorously tested. Some models did not consider the facts of growing. Linear equations that are constructed by ridge regression have been used in many fields except financial risk early warning. In addition, the most of models are horizontal model, without longitudinal considerd.This paper solves the problem and attempts to build financial risk warning model of ridge regression. Meanwhile, the improved Z-score model proposed by many scholars not carried heteroscedasticity test, the resulting model is not rigorous. In this paper, lateral model has been improved by sieving the lateral indicators. At the same time, using logistic regression, principal component analysis, ridge regression and other statistical methods construct a new model though the use of longitudinal screened indicators. Compared the two existing models better forecasting results with two modified and four developed models, I obtained the conclusion. According to the model which comes to conclusion at last, I expound the application of this model.