Financial distress early warning model for listed real estate companies of china based on multiple discriminant analysis

Abstract

This paper uses annual financial statement data of 99 listed real estate companies from A-share market, adopts multiple discriminant analysis to modify a Z-Score baseline model, and establishes a financial distress early warning model applicable to listed real estate companies in China. The findings indicate that the average accuracy of the financial distress early warning model reaches higher than 90%, which is greatly improved from the previous Z-score baseline model. In the context of deepening adjustments in Chinese real estate industry, this model not only provides a reference indicator for business managers and market investors, but also helps policy makers timely evaluate the potential financial risks in real estate industry. © 2014 Springer-Verlag Berlin Heidelberg.