A Study Of Financial Distress Prediction On Chinese Manufacturing Listed Companies

As the economy grows rapidly in China and the global economic environment begins to operate as a single economic unit, companies in different scales are all facing fierce market competitions, complex market environments and great pressure on development. Between2008and2012, there were269listed A share companies in China who used to be in financial distress and had been special treated. Thus if we can make an effective model to predict financial distress in advance, it will help the investors to make investment decisions and to avoid investing in failing companies, also it will help the creditors to estimate companies’ situations so that they won’t bear unnecessary losses. It will bring with it a profound significance theoretically and practically.On the ground of the status quo of the domestic studies on corporate financial distress prediction, this paper takes Chinese manufacturing A share listed companies who used to be special treated and paired healthy companies as the object of the research, selects three indicators including financial indicators, corporate governance indicators and macroeconomic indicators as explanatory variables, and focuses on selecting predictive variables and on predictive model building.After selecting the samples, the writer firstly do the test of normality for each explanatory variable. According to the test results, choose Mann-Whitney U test to initially screen the variables. Then use factor analysis to further screen the variables. At last use survival analysis method, make an extended COX regression model and a general COX regression model as the financial distress prediction models, so as to compare these two models, analyzes their predictive abilities.In the end of the paper, the writer obtains the research conclusions, makes due suggestions accordingly, lists the deficiencies of the study and expects the prospect of the future research. In conclusion, through the empirical study, this paper shows that the extended COX regression is greatly applicable for financial distress prediction on Chinese manufacturing listed companies.