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Recent developments in Taiwan’s construction industry only endorse the dynamic and volatile nature of the Property Development Sector. Most developer firms suffer huge revenue reduction and loss. Most firms, which manage to survive the recession, o not see any deterministic path of evolution. Yet, those who resist the trend of change do receive a strong warning of extinction from the financial reports. The aim of this work is try to develop a means of looking into the future of the private construction sector, via careful examination of financial data being acquired from the troubled firms in the recent past.
This work compiles all obtainable financial reports of troubled developer firms from 1997 to 2001. A crisis-warning model is being envisaged based on the famous Logit Model. Based on the acquired financial data and the proposed Logit model, the forecast capacity is fairly acceptable, with correct rate of 83.9%, 80.0% and 67.7% for the past one, two and three years respectively. Thus, the proposed model does render useful in predicting a crisis status through existing financial data.
Also in this work, there exist strong correlations between financial failure and net earning and inventory turnover ratios. Evidently, a developer may not want to focus on the profit generated from sales, but will be best to emphasize on customer needs, so that sales can still be managed at high volume, thus enhance greatly the firm’s liquidity and solvency.
Keywords: Property Developers, Financial Ratios, Factor Analysis, Logic Regression Model, Financial Crisis Precaution model.
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