Research On A Financial Distress Warning Model And Empirical Analysis For Business Enterprises In China

Entering into WTO leads enterprises in China facing more competitions. Being important part of domestic economic development and structure betterment, business enterprises nowadays play more important role and get into globalized competition more rapidly. Except for fasten developing, domestic business enterprises have lay concealed dangers rising from less ability of competition, and weak ability of financing. All of these should stop developing and lead to bankruptcy.Therefore,it is very important establish the financial distress warning model ,for making early warning of financial distress and making enforces to keep a lookout so that to strengthen the ability of anti-crisis. It is a useful research for developing financial management of business enterprises and strengthens the ability of international competition.This issue put first focus on natural of financial distress of business enterprise and domestic and abroad study of model theory and practice of financial distress warning. Then MDA was used to established the domestic business enterprise financial distress warning model ,and a evidence analysis was carried. This study selected 65 listed companies(A shares) of Shenzhen and Shanghai stock exchange as samples .7-variable discriminate analysis model was conducted by MDA method based on financial rate of above 65 firms. After one-year forecasting testing and applying to BP neural network model, the model was conducted and the critical region of Z-score was gotten .According to the result of testing, BP neural network model is not marked better than 7-variable MDA model. These two models are both worked, overall, efficient and useful. They can be used as useful tools in quantitative analysis of financial distress and credit risks for businesses and commercial banks, investors, etc.Scientific financial warning requires combination of quantitative and qualitative analysis ,That is to say, applying of financial warning model should be combined with analysis of sign of financial crisis so as to warning crisis all-round. Liquidation of merchandises and assets in businesses are smoother than manufacturers .So it is more difficult for businesses to managing and controlling .Thus business enterprises must establish guard against system of financial distress from view point of sensitivity ,overallity and strictness. Full and effective measures should be made to less financial risk ,and lookout financial distress from the origin .