Financial Risk Analysis and Prediction of Chinese Power Industry

H. Jin, C. An, and C. Zhang (PRC)


Power industry, financial risk, risk analysis, prediction


In this paper we focus our study on Chinese power industry, and select 57 Shanghai and Shenzhen-listed companies in power industry from 2005 to 2008 as a sample. We compared the financial ratios between power companies and others to find out differences of financial characteristics between power industry and others, and compared financial failed and non-failed companies in power industry to answer what factors can indicate the risks before the power companies trapped into financial crisis. Experiential text shows that cash to current debt ratio, ROE, net asset growth ratio, and inventory turnover are four uncorrelated and significantly different ratios in financial failed power companies. According to the result of the analysis we designed an early-warning model for power industry, using logistic regression, which takes the industry characters into consideration and suggests a good capability in risk prediction.

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