Study Of Listed Steel Companies' Financial Crisis Early Warning

Iron and steel are known as the "industrial food",and China is a big country on their product,and their production has been always ranked first in the world since 1996.The iron and steel industry is the basic and pillar industry in Chinese national economy,and they play irreplaceable important supporting role in the process of Chinese industrial modernization.Moreover,they have made a significant contribution for Chinese economic development and social stability.China always pays great attentions to healthy development and growth of the iron and steel industry.A series of macro-control policies have been drawn up since 2003.Despite China issued a series of macro-control policies,little effect has been made.China's steel industry profit margins were under industry profit margins for many years.Guangdong Shaogang Songshan Iron & Steel Co.Ltd.and Angang Steel Co.Ltd.were * ST in 2013,Nanjin Iron & Steel Co.Ltd.was * ST in 2014 too.Most of listed steel enterprises struggling hovered between a loss and a substantial loss in 2015.If listed steel companies' financial crisis early warning is made,and financial crisis is diagnoses and warned early,thus decision makers can take action to prevent and defuse the crisis or reduce the potential harm as far as possible to the maximum extent.Maybe the progress of steel companies' De-capacity will be more smoothly.Based on the results of a large number of studies on financial crisis warnings carried out in China over recent years,combined with the characteristics of Chinese listed iron and steel enterprises,this thesis analyzed the main accounting and financial data,the number of employees and their education level data of our country listed steel enterprises in the past five years(2011—2015)in-depth.After then,this thesis studied and compared a variety of financial early warning models using the data mining technology.Specifically,the following work is carried out in this thesis.(1)Financial crisis warning research status was reviewed.This thesis reviewed and analyzed financial crisis warning research present situation from four aspects,namely research significance,classification of research methods,selection of warning variables and models.Then this thesis points out that there are four major problems in relevant research and practical application of the financial crisis early warning,namely weak theoretical foundation,selection of warning variables,ignoring the industry differences and hysteretic nature.This task laid the foundation of research significance and background for the further research in this thesis.(2)Typical listed steel companies were analysised.To better understand industry differences,over capacity and financial data,this thesis analyzed the main accounting and financial data,the number of employees and their education level data of five typical companies(including Baoshan Iron and Steel Company Limited,Wuhan Iron and Steel Company Limited,HeBei Iron and Steel Company Limited,Ma'AnShan Iron and Steel Company Limited,Shandong Iron and Steel Company Limited and Beijing Shougang Company Limited)in the past five years(2011—2015)in-depth.(3)Listed steel companies' financial crisis early warning was studyed.A total of 40 listed steel enterprises were selected.These include Baoshan Iron and Steel Company Limited and HeBei Iron and Steel Company Limited,which are ranked in the manufacturing industry's top 10,as well as Beijing Shougang Company Limited and Wuhan Iron and Steel Company Limited,which are ranked top 40 in Fortune 500.There were A-stock companies,B-stock companies,and H-stock companies;in addition to leading companies in the iron and steel industry,there are also companies faced the risk the delisting.The financial crisis sign commonly used by most researchers,being labeled *ST as a result of an abnormal financial situation(special treatment due to delisting risk warning),is used as an indicator of financial crisis for listed companies.There are lots of indicators that regard EPS index,dividend capacity,earnings quality,profitability,cash flow,solvency,growth capacity,operational capability,capital structure,and DuPont analysis,as well as other aspects.These indicators,which can comprehensively reflect a company's financial situation,were selected as indicator variables for the financial crisis early warning models.10 different data mining methods,including Na?ve Bayes,Logistic,SMO,AdaBoost,Bagging,Stacking,Vote,J48,Random Forest and Random Tree,were used to construct early warning models for financial crisis.Experimental results show that for the all companies,models in accordance with the early warning accuracy rate from highest to lowest,followed by Random Forest with 99.00%,AdaBoost M1 with 98.90%,Logistic with 98.80%,RandomTree with 98.60%,J48 with 98.50%,SMO with 98.40%,Na?ve Bayes with 98.30%,Bagging,Stacking and Vote with 97.00%.For the companies labeled *ST,the Logistic model is best,warning accuracy of 83.33%;Na?ve Bayes model secondly,warning accuracy of 58.33%;followed by AdaBoost M1,J48 and Random Tree models,warning accuracy of 41.67%;followed by SMO and Random Forest models,warning accuracy rate of 33.33%,Bagging,Stacking and vote models worst,warning accurate of 0.(4)Suggestions and countermeasures for steel companies with financial crisis,for example,early retirement,internal stop post and promoting non-steel development.The contribution of this thesis can be summarized as follows.In order to make up selection of warning variables varied from person to person,this thesis used models to select warning variables,so it is possible that different models with different warning variables.To compensate for the hysteretic nature problems in the existing financial crisis early warning model,this thesis did not use the annual report data,but the quarterly reports data,a total of 20 quarter,800 records.This thesis adopted 10 different methods to build financial crisis early warning model,more focus on warning accuracy of enterprise in financial crisis,and not just focus on all the warning accuracy.In the background of reducing excess capacity and supply-side reform,study of listed steel companies' financial crisis early warning has important practical significance.First,the study can help investors and creditors to correctly judge the financial condition of listed steel companies and provide reference for their investment and financing decisions.Second,the study can help managers to timely detect the potential crisis existing in companies to develop a remedial measures as soon as possible.Third,the study can help deepen understanding overcapacity problem in the iron and steel industry,and provide a basis for effectively solving overcapacity problem and the next step in the development of the iron and steel industry to a certain extent.Fourth,the study can offer reference to deal with zombie companies,merger and reorganization,personnel dismissal to more scientific grasp the direction of development of iron and steel industry in our country,further deepen supply-side reform,aid China's steel companies in surviving the redistribution of the global iron and steel industry.