Financial Distress Prediction Based on Financial Ratios and Market Information

摘要

Utilizing 129 manufacturing enterprises as samples, this paper first makes use of Altman (1968) Z-model, F-fractional model and Oholson model based upon financial ratios to calculate their respective scores. Also, it employs KMV formula on the basis of Merton model to compute default distance (DD) and other indexes. In addition, it tests the consistency of two types of models relying upon the rank tests, which elicits the result that these two models in current China is inconsistent, and two models provide respectively a certain number of conclusions. Still, it introduces the concept of Value of Risk (VAR) into financial distress prediction, and establishes distress prediction model based upon the combination of a wholly new index (company net profit/ risk value of the market value of the company) and financial Index. Empirical results indicate that this model is superior to the simple accounting model.