Manufacturing Industry In China Listed Companies' Financial Early Warning Analysis

Along with the reform deepening of market economy system and the rapid development of capital market, financial crises appear in some listed companies because of external intensified market competition and internal mismanagement. In order to survive and to develop in the fierce market competition, China's listed companies must establish financial early-warning system to deal with various risks and to prevent financial crises. One of the objectives of capital market in our country is to safeguard the interests of stockholders and creditors. From this point of view this paper has both theoretical and practical importance.Altman put forward a Z-score model to predict financial risks. It uses multivariate analysis techniques to predict financial crises of companies. This model has got widespread application in many countries. Based on Altman's Z-score model, this paper adds cash-flow indicators to the model we establish. 24 companies are used in establishing model sample, including 13 new added ST-companies and 11 Non-ST companies in 2006. Test model samples include 11 ST companies and 11 Non-ST companies. The results shows that one year previous to the occurrence of financial crises the prediction accuracy rate of the model we establish for ST companies can achieve 90.91%, and for non-ST companies 81.82%. Two years previous to the occurrence of financial crises the prediction accuracy rate for ST companies can achieve 81.82%, and for non-ST companies 72.73%. Three years previous to the occurrence of financial crises the prediction accuracy rate for ST companies can achieve 72.73%, and for non-ST companies 63.64%. Thus, the model we establish proves to have a strong predict ability.