Financial Distress Prediction in China

Jianguo Chen (), Ben Marshall, Jenny Zhang () and Siva Ganesh ()
Additional contact information
Jianguo Chen: Department of Finance, Banking and Property, Massey University, Private Bag 11-222, Palmerston North, New Zealand
Jenny Zhang: Bank of New Zealand Cards, Level 14, 80 Boulcott Street, Wellington, New Zealand
Siva Ganesh: IIST (Statistics), Massey University, Private Bag 11-222, Palmerston North, New Zealand

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2006, vol. 09, issue 02, 317-336

Abstract: We use four alternative prediction models to examine the usefulness of financial ratios in predicting business failure in China. China has unique legislation regarding business failure so it is an interesting laboratory for such a study. Earnings Before Interest and Tax to Total Assets (EBITTA), Earning Per Share (EPS), Total Debt to Total Assets (TDTA), Price to Book (PB), and the Current Ratio (CR), are shown to be significant predictors. Prediction accuracy achieves a range from 78% to 93%. Logit and Neural Network models are shown to be the optimal prediction models.

Keywords: Financial insolvency; prediction; Chinese market; financial ratios; JEL Classification: G330; JEL Classification: G150 (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (9)

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DOI: 10.1142/S0219091506000744

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