Financial Risk Diagnosis of Listed Real Estate Companies in China Based on Revised Z-score Model

Abstract

Under the background of China’s economic slow-down and property boom, financial risk analysis of listed real estate companies has gained great importance in recent years. The aim of this study is to investigate the financial risk of China’s real estate companies between the years 2011 and 2015 by using Z-China score model. Based on panel data of a sample of 45 listed real estate companies, this study finds that financial risk of China’s real estate industry has been increasing over the past five years, and a growing number of listed real estate companies are classified as unhealthy companies. In specific, 35 listed companies are grouped into gray area in 2015, and 4 companies are identified as financially distressed companies who are very likely to suffer financial crisis in the following two years. Further analysis identifies that profitability decline is the key factor raising the risk of a financial distress.