With the rise in coal price, the proportion of loss-making enterprises show an upward trend in China's coal industry. The paper uses Altman Z-Score model to measure financial risk of 19 listed companies in the coal industry in A-share market from 1995 to 2007. Empirical results show that Year-Based price index of coal price has a negative correlation with the financial risk but not significantly, and coal chain price has a significant negative correlation with the financial risk. Further research indicates that enterprises increase bad investment and a lot of debts caused by short-term rise in coal prices, The results also show that the financial risk in the coal industry declines with the rise of GDP growth rate and increases with the rise of inflation rate.
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