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Empirical analysis of the financial early warning and equity structure of listed companies

Author: LiuChangCai From: www.yourpaper.net Posted: 2009-10-03 11:25:41 Read:
[Abstract] draw on existing research, based on financial theory, and select the 2003-2007 Chinese listed companies' financial annual reports more comprehensive financial indicators, selected explanatory variables stepwise regression model, to build a financial early warning model by data test to screen the explanatory power of early warning indicators. Listed companies' financial early warning model, using the model predicted, the results showed that the design effective early-warning mode.
Listed companies [J]; financial early warning; Logit model; ownership structure; empirical analysis

Background

With the process of reform and opening up, China's listed companies from scratch, from less to more, from weak to strong, continuous growth and development, has become the effective strength of the national economy. Part of the listed company's financial crisis is starting to show, and the financial crisis of the listed companies sprouted from the initial to the extent of deterioration, not instantaneous due undergoes gradual accumulation and transformation process. In this process, the various factors of the crisis will be, directly or indirectly, in different variations on the "barometer" of the movement of the funds - the value of sensitive financial indicators reflected in theoretical circles, raised the issue of the financial early warning. The scholars also have a different understanding of the financial warning. Dewei to financial early warning of enterprise risk in the financial performance for the individual and related indicators of abnormal. Chen Jingpu financial risk early warning is an alert, it can discover the business potential financial risks, make predictions and their specific circumstances, enabling businesses to timely prevention and control, to minimize the damage. Cai wall Hung believes that the financial crisis early warning based on financial and accounting information based, by setting and observe the change of some sensitive financial indicators, the implementation of real-time monitoring and forecasting of enterprises may or will face financial crisis. Yangzong Chang and Zhao financial failure warning is timely data management, comprehensive analysis, reflecting the enterprise, the external operating conditions, the corporate existence of the potential financial risk of failure to warn operators and other stakeholders related to a set of tools.

We believe that the financial early warning is based on the financial statements of the enterprise, business plans and other relevant accounting information is based on the use of accounting, statistics, finance, business management, marketing theory, the use of ratio analysis, comparative analysis, factor analysis and other analytical methods, analysis and forecast on the business activities, financial activities, and to discover the potential risks of the enterprise in the operation and management activities, warned before the crisis to business operators, supervision and corporate management to take effective measures to avoid the potential risk of the evolution of into a crisis or even the failure of financial analysis and forecasting activities. Financial risk early warning system, by setting and observe the change of sensitive financial indicators, forecasting, financial analysis system of enterprise group may or will be faced with the financial crisis. Listed companies' financial risk early warning system, that is, into the basis of information of listed companies, the potential risk of listed companies in the business activities of real-time monitoring system.
China's listed companies' financial crisis early warning, build an effective application of the financial crisis early warning model accurately listed companies based on financial indicators predict future financial crisis levels of market participants has important practical significance. A viable financial early warning model, can play the role of an alarm, to remind the market to participate in the party's attention. With financial early warning model for listed companies, the company's management can discover the deterioration of the financial condition of the Company, as well as the reasons for the deterioration of the company's financial position, timely, targeted to adjust business strategy to reverse the company situation deterioration.
About the relationship between ownership concentration and corporate value, corporate performance, scholars have made a certain amount of research. Berle and Means earliest examines the relationship between ownership structure and corporate performance, and that the more dispersed shareholding, the company more difficult to achieve the optimal performance. Shleifer and Vishny mitigate agency problems from the point of view on the positive role of large shareholders. Model description in the case of other conditions are the same, the presence of the major shareholders of the value of the company has a positive effect. Because a significant proportion of equity makes large shareholders have an incentive to monitor managers, thereby avoiding the "free-rider" problem. Demsetz and Lehn using the regression found that there is no significant correlation between accounting profit margin for the 511 companies in the United States in 1980 on a variety of equity concentration index. McConnell and Servaes the United States in 1976 to 1173 samples of the company and in 1986 to 1093 sample company's To-bin's Q and equity structure, found Tobin's Q and between of company internal shareholders that has the options has a curvilinear relationship, when internal shareholders have equity increases from zero, the curve slopes upward, the equity ratio of 40% -50%, the curve is downward sloping. Claessens, Djankov and Lang in the shareholding structure of enterprises in East Asia, were found in these countries and regions, the high concentration of corporate equity, and positively correlated with the enterprise value. Lins and Servaes in enterprise studies of 18 emerging market countries also found that large shareholders have a positive impact on corporate value in the weak areas of the legal system of protection of the interests of investors and their effectiveness, the major shareholders in the corporate governance as important role, has a positive effect.

Study listed company equity structure and the company's financial risk, build effective application of the financial crisis early warning model to accurately predict the listed company's future financial crisis levels, the article is very rare, and we do a brief analysis.

Second, the empirical analysis of listed companies' financial early warning and equity structure

(A) the shareholding structure of listed companies in the financial early warning of assumptions. The shareholding structure characteristics from the quantitative and qualitative aspects of research, that is, the number of shareholders and equity nature. In this research equity concentration, the nature of the largest shareholder, the correlation of the outstanding shares of the listed companies' financial warning degree. Now given assumptions between them:
1. Concentration of listed companies and the company's financial risk for a positive correlation. In the case of a high concentration of equity, due to the lack of checks and balances power, easily lead to "the largest shareholder control, external governance role in weakening the case, the controlling shareholders are likely to erode the company's profits, deprived of the interests of minority shareholders, resulting in high agency costs, leading to a decline in corporate performance, operational risks rise. Meanwhile, due to the dominance led to the lack of democracy and scientific in the company's decision-making mechanism. With the improvement of the degree of concentration of ownership of the controlling shareholder, the gap between cash flow and voting rights will be further increased, and the negative effects effect will increase as well. Therefore, the high degree of ownership concentration will increase the company's financial risk.
2. The proportion of the company's financial risk of the outstanding shares of A shares to a positive correlation. The company mergers and acquisitions is a very critical governance mechanism. Studies have shown that mergers and acquisitions of target companies generally underperformance company, can be replaced after the acquisition of the company's managers to control its management; acquisitions can make the value of the company after the merger is greater than the arithmetic and the acquisition value of the company and the target company. Incentive and restraint mechanisms caused by the behavior of potential acquisitions in China's capital market has not yet formed. Case "due to the dominance of state-owned shares tradable A shares of the total share capital of proportion is very small; many of the companies listed in 1994, before the entry into force of the" Law of the People's Republic of China (hereinafter referred to as "the Companies Act"), has proportion of tradable shares required by the Companies Act failed to meet the 25% limit. Can imagine, this deformity shareholding structure, the A-share market of mergers and acquisitions behavior and can not play its due effect, but susceptible to corruption, financial risk will inevitably bring.
(B) the selection of the sample. Take into account the possibility of a financial risk, we choose sT listed companies in 2003-2007 as the selection of the sample objects, excluding incomplete information and can not be paired, a total of 158 companies, plus 158 paired, a total of 316 company. Relevant data from the 2003-2007 annual reports of listed companies' financial database and Qilu Securities platform data processing EViews5.0 under.
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