Research On Financial Risk Management Of Business Groups In China

The scale of business groups and the level of development have become an important indication to measure the development and economic power of a country or a region.To some extents,the competitions between countries have actually been that between in large business groups now.Business groups,as a combination of many businesss,in which parent company use capital to unit the other members through controlling or paticipating shares,plays a tremendous role.Therefore,in the fierce market competitions,the bankruptcy tragedy of business groups happens frequently, for example,Nanjing Sweet,Giant Group,Delong Group,including Lehman companies,Enron and China Aviation Oil Singapore companies which is far away,and so on.All of them make us think about the risk management of business groups but financial risk is the represent of all kinds of various risks in many economic entities. The chain of property right between parent company and subsidiary company is not only a title but also a risk.An accident or financial risk diffused by the chain of property could cause a whole financial risk in business groups and maybe become a social risk for the business groups’status and effect.It can be proved from the bankruptcy of enron and delong,the former of which ranked eighth in the world’s top 500 companies.So, financial risk management of business group is not only suit to the group itself but also to the social requirement.Actually,what we do in the financial risk management,no matter in the construction and running of risk managemengt system or in subjective consciousness,is insufficient.Thus,it is of great practical significance to study financial risk managemengt of business groups.Based on property right theory,investor theory,corporation governance theory, commissioned agent theory and management control theory,combined system design and game,using empirical study and normative study,this paper focuses on the mechanism of financial risk forming,evaluation of the financial risk in our country and construction of the management system.In order to raise problem,analyse problem and resolve problem,this paper write in the way as follows:①basic theory analysis;②show the severe situation our groups faced currently;③design countermeasures to cope;④analyse the application of these countermeasures.In the first three chapters, the paper define the business group and financial risk which is the study boundary, judge of the former research comprehensively and analyse the forming mechanism of financial risk in the circle of capital.All of those could supply theory foundation and support.In order to reveal situation of risk and present problems,the chapter four and five analyses the situation of groups and primary problems by empirical study and normative study,which supply necessary explainations for system construction of risk management.The core of this paper is chapter six,in which we construct the financial risk management system of business groups to enhance abilities to withstand financial risk.There are three keys in the risk system:risk management structure,risk management mechanism(which include budget mechanism,an early warning mechanism,incentive and restrain mechanism,internal auditing mechanism and capital managemeng mechanism),and risk management process.All of those are designed scientifically and provide a way to carry into execution.Based on the former research, Chapter seven analyses practical application and combined of cases to prove the whole paper and the primary view more convincing.In the end,we make a summary,and give some suggestions about infrastructure construction of financial risk management in the view of a whole country because the macro economic environment can prompt the financial risk management system completely.According to the research,the paper finds that financial risk actually engender, transfer and accumulate in the circle of capital by a means of accounting elements. Accumulation of financial risk could exacerbate the situation and make a break at last, but we could measure and evaluate them by the change of accounting elements.We also found that financial risk in business groups,private-owned company and regional government-controlled company is obviously higher than non-business groups, state-owned company and central government-controlled company.The business groups could strucuture management system in terms of strategic planning and mechanism constructure to avoid and control financial risk.We consider that a proper financial risk management system could base on real-time information system and the central part of which are risk management structure,risk management mechanism and risk management process.Assisted with corresponding measures,the whole system could play a important role in defending and controlling risk,which is helpful to improve risk resistant abilities of business groups.