| Risk can be happened in any place and in any time. Kinds of financial risks oftenhappen and then result in losses. Sometimes serious financial risks can make acompany bankruptcy. So financial crisis alarm system is an important part of company′s financial risk management. However, in our country, financial distress predictionjust begins. The main reason is the lack of uniform Accountant Rule beforeJuly,1,1993. Thus, it is urgent for us to work on financial distress prediction in China.In the last 16 years, the Chinese security market developed rapidly. Becausethere are so many public companies, if we can predict the failure of them beforehand,it is significant not only for supervisor, bank and investors, but also for publiccompanies themselves.This study regards public companies received special treatment as a signal offinancial distress, and try to predict financial failure of public companies in China. Iuse Logistic Regression model to predict financial distress. This study consists of fiveparts. The foreword introduces the background and significance of the study. Chapter1 introduces the relative risk of company′s financial risk management. Chapter 2 isthe financial crisis alarm system. Chapter 3 is the introduction of some financial crisisalarm models. Chapter 4 introduces the analysis of financial crisis alarm system,including how to choose the samples, variables and model and explaining the relativetheories and analyzing the empirical result. Chapter 5 is the conclusion, suggestionand the future development.Through the study, I find that liability/asset, net profit/equity, the last year totalasset/this year total asset, quick ratio, working capital /current assets, EBIT/interests,sales/total assets et. can predict financial distress accurately. I also find that LogisticRegression model is effective in prediction accuracy. We can predict financial distressof a public company before it receives special treatment by Logistic Regressionmodel. |
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