The effect of equity control indicators on financial distress prediction: Empirical evidence from Chinese capital market
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School of Business |
Master's thesis
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Date
2024
Department
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Mcode
Degree programme
Information and Service Management (ISM)
Language
en
Pages
69
Series
Abstract
Due to the fluctuations in the international economic environment, an increasing number of Chinese listed companies have been identified by security regulators as the companies in financial distress, leading to growing operational and financing pressure. Investors should make more accurate predictions about corporate financial difficulties to guide their investments, and identify different indicators that have predictive effects on financial distress. In this thesis, we use data in Chinese capital market from 2003 to 2021, to examine the predictive effect of equity control indicators on financial distress through factor analysis and logit regressions. We also conduct robustness tests, and the results show that based on data in Chinese capital market, equity control indicators are significantly negatively correlated with financial distress. At the same time, we compare the predictive effect of equity pledge indicators with equity control indicators. The results show that equity pledge indicators are unstable in financial distress prediction, and do not enhance the performance of the regression models as equity control indicators. The empirical results in this thesis are different from previous literature and we further explain the results across diverse market environments with different financial distress measurements.Description
Thesis advisor
Malo, PekkaKeywords
financial distress, equity control, factor analysis, logit regression