The Analysis Of Factors Helping~*ST Firms Turn Losses To Probit

With data collected from May2003to December2005, this article studies how companies facing delisting risks reversed crisis in a very short time, and whether they made it or not at last. In China, these firms are special treaded in the market, therefore they are called*ST. The samples in this study are public listing*ST companies in two year losses continuously. The studing period lasts four years from the very first time*ST companies made a loss to three years later. This paper has129samples in total, with106survived and23sadly delisted. In order to find out how they made quick profits, this paper sets five variables:the macroeconomic situation, size of the enterprise, ownership property, non-recurring gains and losses and manipulate accruals. In this article, we will see whether these factors did have a significant influence on reversing the difficult situation through logistic model and descriptive analysis.Our results show that first, macroeconomic situation and size of the enterprise did not really matter when the company itself was in severe financial problem. Secondly, ownership property however was very important. This suggests that state-owned*ST companies were more likely to stay in the market than non-state-owned companies, other things been equal. Further study shows, ownership property was most significant in the year the company turned their profit from negative to positive. Third, non-recurring gains and losses in our study stood out as the most important factors. It therefore suggests that it was the most common tools companies used to avoid been delisted. Usually, companies would cut profits from other years to add to the reversing year. Unlike foreign companies, manipulate accruals were not actually a good choice for Chinese*STs, because of the audit supervision system.This paper contributes to the former in two aspects:one, most articles focus only one of these factors to this problem, while neglect the correlations between factors and factors. This article, however see this problem in a more comprehensive way. What’s more, this article uses both quantitative analysis and descriptive analysis instead of descriptive analysis alone, which was most commonly seen in Chinese articles, to ensure us a more persuasive result.