| Summary: | 碩士 === 銘傳大學 === 財務金融學系碩士在職專班 === 92 === Making a comprehensive survey on domestic enterprises, the occurrence of financial distress results not only from unsound operation constitution but also from imperfect managing system. The financial distress has great influence on companies, shareholders, employees, inventors, financial institutions, and etc.. Furthermore, this effect is so deep and comprehensive as may trigger social or national confidence crisis. Hence, in this study, the factors of corporate governance are investigated in order to figure out if those factors are early warning indicators of financial distress. If so, a financial alert model could be developed and help inventors to identify the financial distress early. As a result, the financial loss of people could be decreased and the impact on national competition could be reduced.
In this paper, the variables of financial ratios and corporate governance factors are used to develop the financial alert model. The listed companies in Taiwan stock market that encountered financial distress from 1996 to 2003 are selected as studied samples. Logistic regression is employed here to construct financial alert model for the listed companies in Taiwan stock market. The empirical results are stated as follows:
1. The deterministic variables for predicting financial distress are financial ratios and corporate governance factors. There are significant differences between the variables in normal companies and those in financial distress companies.
2. Under the financial alert model in which the corporate governance factors are considered, the explanatory variables in the first year before financial distress are quick ratio, return on capital, accounts receivable turnover, cash-flow ratio, the percentage of shares pledged by directors and supervisors, and the ownership concentration of the controlling directors’ family shareholders; all the variables are significant. In the first two year prior to financial distress, the explanatory variables are return on asset, liability ratio, the percentage of shares pledged by directors and supervisors, the proportion of institutional directors, the board size, and the ownership concentration of the controlling directors’ family shareholders; all the variables are significant. In the third year before distress, the explanatory variables are liability ratio, the percentage of shares pledged by directors and supervisors, and the proportion of institutional directors; all the variables are significant.
3. Under the financial alert model without corporate governance variables, the probability of correct classification over the first 1-3 years prior to the financial distress are 89.2%, 71.6%, and 65.1%, respectively; after testing the predicting ability of this model by using holdout samples, the probability of correct classification are 100%, 72.0%, and 58.0%, respectively. Under the financial alert model constructed by financial variables and corporate governance variables, the probability of correct classification 1-3 years before distress are 93.8%, 97.0%, and 82.4%, respectively; after testing the predicting ability of this mode by using holdout samples, the probability of correct classification are 100%, 100%, and 76.0%, respectively. The results show that the forecasting ability of financial alert model can be strengthened by adding corporate governance factors into this model.
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