The Research On Enterprise Cash Flow Risk Measurement And Information Transmission Effect

Cash flow management has always been an extremely important aspect in theprocess of corporate capital operation and financial management. With the outbreak ofthe financial crisis in recent years, cash flow risk management is getting more and moreattention from enterprise managers. Previous researches on cash flow and cash flow riskmanagement stress more on theory and the descriptive study of the related data, andquantitative research based on theoretical analysis is relatively rare. From theperspective of theory and practice，this paper analyzes the measurement method,information transfer effects and the management of enterprise cash flow risk, which isbased on the theories of corporate finance, information economics and marketmicrostructure.Firstly, on the basis of the literature review, this paper theoretically analyzes cashflow risk and its information transfer effect. The value at risk is introduced to analyzethe cash flow risk, and then, this paper explores the influencing factor of cash flow riskfrom the internal and external perspectives. When referring to the informationtransmission effect, cash flow risk can pass the information about enterprise value,investment return and credit risk and other important decision-making information tothe shareholders and creditors.Secondly, by applying the top-down method, this paper constructs CFaR modelwhich is taking the distribution features and temporal characteristics of cash flow intoconsideration. In order to control the influence of the operation condition and externalenvironment, this paper selects comparable listed companies which have similarfundamentals. The empirical results show that: companies with the similar asset size,profitability and return on assets face cash flow risk with significant differences. CFaRmodel considering time series characteristic is prior to the model consideringdistribution characteristics, but this method has limitation that the cash risk influencingfactor can not be recognized.Thirdly, based on the bottom-up method and considering influencing factors’distribution characteristics, this paper constructs the panel data CFaR model for cashflow risk measurement. According to the influencing factors of the cash flow risk,taking non-financial listed companies in Shanghai and Shenzhen Stock Exchangeduring2007-2012as the research objects, the Chi-square test and Kolmogorov-Smirnov test are applied for fitting the distribution of the cash flow risk. The study finds that themajority of operating cash flow risk influencing factors does not follow a normaldistribution, and does not follow random walk process, but have some characteristics ofskewness and kurtosis. Then, on the basis of risk factor description, the panel data cashflow risk measurement model is built, and the result shows that construction industry,real estate industry, and comprehensive industry have the highest cash flow risk, andtransportation industry is with the minimal risk from the point of cash flow risk value.But from the point of cash flow risk degree, the construction industry, real estateindustry and the comprehensive industry has the highest cash flow risk, and the miningindustry has the lowest cash flow risk. Nextly, through the clustering analysis, it isfound the construction industry faces with the highest cash flow risk, and agriculturalindustry, real estate industry, and comprehensive industry are subsequently followed bythe degree of the cash flow risk. Additionally, Water and electricity gas production andsupply industry, mining industry, transportation industry and warehousing industry facethe lower risk as the higher monopoly characteristic of these industries. Meanwhile,according to the predicted failure times, the CFaR model based on Top-down methodand CFaR model based on bottom-up method are compared, the result shows that thelater is more advantageous, and CFaR model based on bottom-up method also showscertain advantages in the aspects of model interpretation and decision-making.Then, this paper analyzes the information transfer effect of cash flow risk. On onehand, from the perspectives of the stockholders, corporate cash flow risk passes theenterprise value and investment revenue information to their stockholders. Theempirical results show that cash flow risk has significant influence on enterprise valueand return on investment. The property characteristic can significantly adjust therelationship between cash flow risk and enterprise value, and the relationship betweencash flow risk and enterprise value of non-stated company is more sensitive, while thelarger stakeholders’ share can not adjust the relationship between the cash flow risk andthe enterprise value and the investment return. On the other hand, corporate cash flowrisk can pass related information to the creditors. Introducing the cash flow risk valuecan improve the prediction ability of credit risk assessment model, which means cashflow risk has important signal transmission effect on enterprise credit risk,Finally, based on the theoretical and empirical results, this paper providessystematic countermeasures which are under the view of CFaR from the angles ofroutine operations, risk early warning and risk handling. Enterprises should focus on therisk prevention in the daily cash flow risk management, and can build a scientifically cash flow risk early warning system based on the CFaR model as well, and takedifferent measures to deal with the cash flow risk according to the degree of the cashflow risk.