SHORT ESSAY-PORTFOLIO

The Analysis of Finance Early Warning Alarm about Listed Company

Abstract

Since it is a gradual process for listed companies to plunge into financial failure, it is desirable to discern the potential risks in advance. This paper, with the adoption of multiple discriminant analyzing approach, tries to find out optimal variables and financial failure predicting model for Chinese listed companies based on audited accounting data. Competitive market economy has brought opportunities as well as making business face greater risks and crises. In the fierce market competition in order to survive and development, China's listed companies must establish financial early warning system that can help enterprises accurately predict and prevent financial crisis. This paper discusses the financial crisis, the practical significance of early warning systems to analyze their problems in applications based on the effective use of the listed companies the financial early warning systems were proposed.

The Analysis of Finance Early Warning Alarm about Listed Company

Introduction

With the continuous development of capital markets and improvement of listed companies to conduct early warning of financial crisis has been a hot topic of academic circles at home and abroad. Financial crisis early-warning is based on financial and accounting information, through the setting and observe the changes in some sensitive early warning indicators of business may or will be implemented by the financial crisis facing the real-time monitoring and prediction warning. In recent years, some listed companies because the governance structure of balance, chaotic management, company management and many other reasons, resulting in decreased performance of the company by a loss, financial condition or insolvency exception of serious cases, special treatment eventually be faced with delisting danger, so that investors, creditors and other stakeholders suffered tremendous losses. However, if a listed company through relevant information, building effective early-warning models of financial crisis, timely analysis of the problems found and to take effective measures for the good times of adversity, we can help the listed companies to a large extent, guard against and defuse financial crisis. However, due to various reasons, the financial early warning systems in China's listed companies have not yet been widely applied.

Accounting information distortion impact the effectiveness of the financial early warning systems. Listed company's financial early warning system designed to use a lot of financial data, real and timely financial information to establish an effective early warning system a viable financial base. With the separation of management and ownership, principal-agent relations in the prevalence of listed companies, the principal and agent information asymmetries that exist between, making China's listed companies, the existence of information asymmetry between investors and the management of the problem, the management in the preparation and reporting of accounting information has an excessive rights, and the existing monitoring mechanisms and an independent audit mechanism to be difficult to ensure the quality of financial information of listed companies. Pervasive accounting information distortion is bound to affect the effectiveness of the financial early warning systems, thus further affecting the different stakeholders involved in the use of financial early warning system ...