An Empirical Study Of Financial Distress Of Listed Companies In China

With the economic boom, the listed company has been classified as ST or * ST company due to financial crisis is not uncommon. With increasingly financial problems, financial distress of listed companies has become an important issue of concern in academic and practical sector.The emergence of financial crisis is a step by step deteriorating process, so financial crisis is predictable. The establishment of the financial crisis early-warning model can help listed companies prevent the crisis, help investors ,creditors and other stakeholders make decisions, help the securities regulatory authorities promote supervision, is beneficial to the audit staff's professional judgment, help the government's macro-control. Therefore, the establishment of the financial crisis early-warning model is of practical significance.In this paper, Chinese A share listed companies in the manufacturing sector is the research object. A listed company whether in financial crisis defining by the standard whether been special treatment (ST) for "financial anomalies". Selected 30 ST companies in 2006-2008 for the first time, 60 non-ST company, constitute the model samples. In this paper, researching the traditional financial indicators, cash flow targets and other indicators of corporate governance indicators, for finding out strong signs of crisis indicator variables by non-parametric test and factor analysis .The research shows that many of the ST company's Indicator variables have significant differences between the normal company's in the first two years been special treated. So predicting future financial situation by indicators is feasible. This study also found that profitability, growth and cash flow situation of the enterprise have strong warning in financial crisis.In this paper, the author analysised the indicator variables, used the statistical logistic regression methods,using SPSS statistical software, to construct a Chinese listed company's financial distress prediction model. The author compared only the traditional financial indicators with the early warning model (model 1) with the introduction of cash flow targets and non-financial indicators for early warning model (model 2) ,and found that model 2 has a stronger predictive power. The results shows that Cash flow targets and non-financial indicators are effective in financial distress prediction model, better able to find signs of financial deterioration.