A Study of Company Financial Distress Warning Model -Constructing with Financial Ratios and Corporate Governance Factors

• Main Authors: Feng-Chuan Tsai, 蔡鳳娟
• Other Authors: Tseng Yi-ming
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/9594y4

碩士 === 淡江大學 === 國際貿易學系國際企業學碩士在職專班 === 94 === In traditional, most of the researches in Business Financial Crisis Prediction Model usually construct in financial ratios. But it cannot projection the financial crisis incidents correctly, and may disregard the factor of non-financial, eg. Govern by Human. In the study, therefore, to analysis both factors of financial and corporate governance to compose the integrity Financial Crisis Prediction Model”, and provide the model which to give consideration to business operation performance and inside supervise management. The study includes ninety in Taiwan’s Industries of Listed and OTC Firms from 1999 to 2005. It contains 30 companies which are full settling, stop order or delisting, and contrast with the other 60 normal firms. From the viewpoint of variable of financial distress predictive model, nine financial ratios before firms get financial crisis in latest three years are selected in this study. Moreover, six of corporate governance factors are also included in the study. This paper employs the performance of the Logistic model in predicting variables. The results of this research as below: 1.The empirical result indicated that the 6 financial variables of Debt-to-equity ratio, Total asset turnover, Cash flow from operating Ratio, financial forecast updating, convertible bonds offering, Hypothecation ratio of directors, supervisor, manager and stockholder are significantly correlated with the cause of financial crisis. It shows that most of firms are cross-holding companies and the main reasons of financial crisis are over usage of financial leverage, exhausted working capital, and ineffective turnover. 2.Based on our empirical results, we find that the percentages of correctly classified firm in latest 3 years the crisis listed firms is 50%-87%, respectively. And incorporating Corporate Governance indicators helps to increase predictability (53%-90%). In addition, the entirety period boosts the predictability from 67% to 78%. It shows using both of financial ratios and corporate governance indicators, so that we could get the proposed model does render useful in predicting a crisis status through existing financial data.