Empirical Research On Financial Early-Warning Of Enterprise Credit Risk Of The Cyclical Industry

Cyclical industries occupy an important position in China's economy.They contain millions of practitioners,huge amount of monetary transactions,and are closely related to the fluctuations in the economic cycles.In recent years,while making remarkable progress,China's commercial banks still fall behind other international banks in risk management.The lack of risk management system is revealed when the banks concentrate their investments in particular companies,industries,and geographic regions,especially in companies in cyclical industries.In economic downturn,the companies in cyclical industries suffered a great deal of difficulties,including large numbers of bankruptcies and credit defaults.Therefore,how to use financial information to quantify credit risks and establish pre-warning system has become the crucial question in regards of the survival of commercial banks.Over the past years,with the gradual maturation of Statistics,Econometrics,and computer technology,pre-warning mechanism of credit risks has also made extraordinary development.Numerous quantitative techniques are applied to the research on financial pre-warning models,and the theory of financial risks pre-warning has become increasingly digitalized,model-based and systemized.This situation will inevitably require China's commercial banks to continue to invest,research and develop financial pre-warning mechanism of credit risks suitable for China's economic market,in order to achieve sustainable,ongoing and healthy development in global competition.This paper mainly focused on the study of financial pre-warning mechanism for enterprises' credit risks in cyclical industries.Through comparative analysis of general financial pre-warning models and exploring the pre-warning models' applicability in China,it reached the conclusion that the Logit model is the most suitable and applicable model for China's commercial banks,in terms of financial pre-warning mechanism of credit risks.In the part of empirical research,this article first selected MB Bank of 60 unlisted companies in cyclical industries as my sample,and chose 30 financial indicators to construct the evaluation system.Then it run independent sample T test to define the significant indicators.The Logit model was then constructed through analysis of principal components,elimination of the multiple co-linearity,and reduction of index dimensions.Finally,using consecutive historical annual financial data,it cross-examinated the study of financial pre-warning on creditrisks.In conclusion,based on the above empirical analysis and the current credit risk management of Commercial banks in China,this article proposed several suggestions for improving credit risk financial pre-warning mechanism.Also,this paper stated some deficiencies of the research,and put forward some possibilities for the further research in the field of the financial pre-warning mechanism of credit risks for enterprises in cyclical industries.