Research on Financial Risk Early Warning of Listed Companies Based on Stochastic Effect Mode

Liduo Zhang,Hafnida Hasan,Lina Zhang,Mohammed Basheri

doi:10.2478/amns.2021.2.00027

Abstract

Abstract In the current era, the market competition is becoming increasingly fierce, complicated and unpredictable. Based on the interaction of various factors, the probability of financial risks of listed companies is significantly improved. Because of its unique characteristics, the listed companies’ operating status affects the overall operation of China’s market economy and occupies a fundamental position in the national economic system. If listed companies have financial risks, it will cause great trauma to our economy. Based on the financial risk evaluation theory of listed companies, this paper analyzes the financial indicators of listed companies through random effect model, and puts forward the risk analysis and prediction index system of listed companies from theoretical and empirical angles, thus constructing a financial risk early warning model based on linear random effect model, and studying the financial risk early warning of listed companies with practical cases. The research results show that the financial risk early warning model of random effect model is feasible and effective, which can help listed companies to carry out financial risk early warning management and improve financial management level.

Highlights

IntroductionWith the continuous development of listed companies in China, the management level of listed companies has been significantly improved. [1, 2] At present, China’s capital market is still in the emerging capital market, and there are some problems, such as great volatility, strong investment and inadequate supervision, which make the financial risks seriously affect the stable development of listed companies.In the aspect of financial risk early warning indicators, with the continuous development of economy, managers’ demand for financial early warning information is increasing day by day. [3] Nowadays, the research on financial risk early warning of listed companies begins to gradually introduce non-financial factors and cash flow factors to improve the selection limitations of traditional financial indicators, so as to establish a more perfect index system and improve the prediction accuracy. [4] In addition, the categories of selected indicators are becoming more and more perfect, it is still difficult to combine with different characteristics of various industries for analysis
The prediction accuracy of health companies by random effect model is the same as that by generalized estimation equation, and the prediction of financial crisis is more accurate, that is, both models estimate that the financial crisis of listed companies is positively correlated with factors 1, 4 and 5, and negatively correlated with factors 2 and 3
The results show that the random effect model is more accurate in predicting financial crisis companies

Summary

Introduction

With the continuous development of listed companies in China, the management level of listed companies has been significantly improved. [1, 2] At present, China’s capital market is still in the emerging capital market, and there are some problems, such as great volatility, strong investment and inadequate supervision, which make the financial risks seriously affect the stable development of listed companies.In the aspect of financial risk early warning indicators, with the continuous development of economy, managers’ demand for financial early warning information is increasing day by day. [3] Nowadays, the research on financial risk early warning of listed companies begins to gradually introduce non-financial factors and cash flow factors to improve the selection limitations of traditional financial indicators, so as to establish a more perfect index system and improve the prediction accuracy. [4] In addition, the categories of selected indicators are becoming more and more perfect, it is still difficult to combine with different characteristics of various industries for analysis. The Exchange has announced that it will make special treatment (ST) for the stock trading of listed companies with abnormal financial status. It is of great significance for the healthy and stable operation and development of the company to analyze the public financial indicators of listed companies through the random effect model to predict the financial risks, take into account the corporate governance, strategy, internal control and other factors, eliminate the limitations, and identify and remedy the problems in financial management in time. It is of great significance for the healthy and stable operation and development of the company to analyze the public financial indicators of listed companies through the random effect model to predict the financial risks, take into account the corporate governance, strategy, internal control and other factors, eliminate the limitations, and identify and remedy the problems in financial management in time. [5]

Methods

Experiment

Results

Conclusion