A Study On Financial Risk Early-warning Model Based On The Enterprise Life Cycle

With the deep reform of the market economy system and the rapid development ofthe capital market in our country, the complexity and uncertainty in the economic fieldbecomes increasingly evident, and it comes to be widespread that financial risk occurs.So in order to forecast corporate future financial condition and keep them away fromfinancial risk, the prediction model is necessary to be set up.Previous study on financial risk prediction is still in its infancy, mainly based onfinancial determinants and learned from the models abroad. The dynamic developmentof the enterprise and its impact on financial risk are ignored. In terms of this, the paperstudies the relation between the enterprise financial risk and its life cycle stages basedon the previous researches, and then it studies the prevention and treatment strategies ofthe enterprise financial risk according to the financial characteristics of the enterpriselife cycle, in order to promote the sustainable development of enterprises from afinancial view.The study took listed companies as sample and selected15financial determinantsfrom the six sides, such as the solvency, profitability, cash flows, related partytransactions.6independent variables for the prediction model were confirmed by T-test,the correlation analysis and principal component analysis. The dissertation adoptedLogit regression analysis and set up the prediction model based on financialdeterminants. Then the enterprise life-cycle factors were considered, the correctedparameter was presented in the theoretical analysis, and the dummy variables wereintroduced in the empirical regression model of the life cycle. At last, the dissertationcontrasted and analyzed the validity of these two models.The dissertation comes into the conclusions as follows: the seed stage plays animportant position in the enterprise development, and financial risk in the period can bedescribed by the qualitative model; traditional indicators, accounting indicators and cashflow indicators have significant effect on financial risk; the degrees of financial riskduring the different enterprise life cycle stages show the difference; the introduction ofenterprise life-cycle factors can improve accurate rate of the prediction model, and it isan effective method to optimize the mechanism of financial early warning.