An Empirical Study On Financial Distress Early-warning Of Small And Medium-sized Enterprises

Small and medium-sized enterprises (SMEs) play an important role in the social economy. With the development of market economy, the competition is more and more fierce which leads to a changing business environment. The operation scale of SMEs is small and it is hard to finance from bank, which affect the financial risk for SMEs. Under the financial crisis in 2008, SMEs have to bear the brunt of damage and a large number of them collapse or get into trouble. How to use various external macroeconomic factors and financial factors of SMEs to predict the financial distress, and prevent the financial risks? This is the main problem of this research want to solve. Thus,it is very important to set an effective financial distress prediction model.In this paper, based on the large number of documents and the actual situation of SMEs, the author selects the 73 small and medium-sized financial distress (ST)of listed companies and 73 Non-ST SMEs from 2001-2010 as samples, the author develops two models, Model I of financial factors and Model II has the financial factors and the macroeconomic factors integrated together, Then this paper uses the Factor Analysis and Binary Logistic Model to predict the financial distress of small and medium size listed companies. Finally, the author tests the two models‘effectiveness.The empirical results show that between the financial factors, the stronger of the solvency, the better of growth capacity and viability of small and medium size listed companies, the smaller probability of financial distress. Between the macroeconomic factors, the growth of interest rates and business climate index affect the SMEs in financial distress. Furthermore, compared the two models through collecting the data in the year before the SMEs into financial distress two years ago and three years ago, we found the Model II can predict financial distressed companies with 90.4%、88.4%、78.8%, but the Model can predict financial distressed with 84.2%、82.2% and 71.9%. The outcomes of the research prove that the Model II integrated the financial factors with the macroeconomic factors has a more satisfactory fitting degree and better effectiveness. Finally, based on the macroeconomic environment and internal micro-economic environment, the author proposes some suggests which can strength the financial management and reduce the financial risk of SMEs.