MD&A Tone And Enterprise Financial Distress Prediction

With the registration system reform and delisting system continues to promote the future listing of the delisting risk will gradually real,investors will need a more real,full,complete and accurate market information to make more accurate judgments and decisions.In this context,relying solely on financial information has not been able to better meet the needs of investor decision-making,which non-financial information began to cause more people's attention.The Management Discussion and Analysis section,as publicly disclosed non-financial information,provides forward-looking and forward-looking information that is not available in other traditional financial information and is relevant to the future of enterprise.Theoretically,investors can fully understand the future development prospect and potential risks of listed companies and make effective investment decision according to the information of MD&A.However,whether the information provided by MD&A has usefulness under the circumstance that the information disclosure system of listed companies is not perfect and the disciplinary strength is not enough.In particular,MD&A in the "future development of enterprises Outlook" This part of the information will help investors to determine the future development prospects of enterprises do?In recent years,the development of computer text analysis technology has made the development of MD&A text information analysis,the domestic research on the text information tone is very little,and the research object has eliminated the ST company,the time span only studies the prediction of the data of the previous year effect.This paper explores the usefulness of MD&A by studying the relationship between MD&A tone and corporate financial distress.In this paper,we use the Logistic Discrete Time Risk Model to build a comprehensive financial distress prediction model on the basis of the traditional financial reporting index forecast model.On the one hand,we can see whether MD&A tone can provide information about the future development of the enterprise.On the other hand,we reconstructed a comprehensive forecasting model covering MD&A tone and compared it with the financial distress prediction model including only the financial reporting indicators.This paper first reviews the domestic and foreign research on the usefulness of MD&A information,then analyzes the correlation between MD&A tone and financial distress.Based on the data of China's A-share ST companies from 2010 to 2015,we use the discrete-time risk model to construct the financial distress prediction model,and uses Logistic regression analysis to analyze the MD&A negative tone on the future performance Predictive ability.The empirical analysis results show that the more negative words used by MD&A and the higher the negative tone of MD&A,the higher the possibility of financial distress will be.In addition,after adding MD&A tone indicators to the financial indicators forecast model,the prediction accuracy of the crisis forecasting model is obviously higher than before.The above two points can be found MD&A tone not only provide information on the future development of enterprises,but also provide incremental information based on financial ratios.Finally,based on the results of this paper,policy recommendations are put forward in such fields as information disclosure,supervision and investor protection,including perfecting the disclosure system of listed companies' MD&A information,strengthening the supervision of information disclosure of listed companies and enhancing the screening ability of investors.