Under The Corporate Governance Perspective, The Going Concern

With the coming of 21st century, the society passed into information age. We all know thatthe most distinct characteristics of information age are globalization of competition, customizationof demand and normalization of change, and the competition among companies became more andmore severe in it. Not only is it difficult for the companies to keep competitive edge, but one bigproblem for them to survive. "Continuous improvement "and "immutable company" is theperpetual pursuit of entrepreneurs, but the fact is that crises befall to the companies at every turn. As non-stability of competition is the normal state of market, non-stability of going-concernis the normal state of company(Boritz,1991). Every company is faced with uncertainty ofgoing-concern every time, and the difference is the degree of uncertainty. The failure of companiesis not the rare thing but the frequent phenomenon. The question is that why some companies survive and other disappear being faced with thesame upheaval, What factors determine these difference, whether we can be conscious of theforthcoming crises and how to improve the going concern. These constitute the focus of our study.Perhaps due to the complexity of factors influencing the going-concern of companies and differentfactors having different effect, the current literature on going-concern still fell into the primitivephase named with "data driving phase"(Chen xiao & Chen zhihong, 2000; Wang qiang, 2002). Butcomplexity and difficulty shouldn't become the excuse for unshaped research, for the result ofregression of model is relevance not causality if being short of theoretic structure (Williams, 1984).So only after we analyze the mechanism of company operation and pick out the key factorsinfluencing going-concern, the research on going-concern could go into the scientific stage. Based on reviewing literature of management, accounting and auditing, we inducethree-factors going-concern model (GOF model). Quality of finance is the direct factor forcompany going-concern, and performance of operation and effect of governance are thefundamental factors for going-concern. These three factors depend on each other and interplay,and influence the state of company together. The going-concern of any company is the result ofinterplaying of these three factors. Out of question, the three-factors going-concern model provided a useful theoreticframework for corporation crisis research. It not only helps the research shake off the deficiencyof data driving, but may improve the ability of management to avoid and relieve the crisis. 1 Main contribution and innovation (1),the dissertation found the three-factors going-concern model for the first time. Thesethree factors including quality of finance, performance of operation and effect of governancedepend on each other and interplay, and influence the state of company going concern. The first isthe direct factor for company going-concern, and the last two are the fundamental factors forgoing-concern. These three factors depend on each other and interplay, and constitute thethree-factors going-concern model. The three-factors going-concern model provided a usefultheoretic framework for corporation crisis research. It not only helps the research shake off thedeficiency of data driving, but may improve the ability of management to avoid and relieve thecrisis. (2),we constructed two-stage model for going-concern crisis perfectly for the first time.The two-stage model included going-concern crisis prediction model and crisis deteriorationprediction model. These treatment improve the practical value of research remarkably. (3),the study put forward that "first loss"become the symbol of going-concern crisis basedon the rigid reasoning and empirical study. 2 Deficiency and future research The three-factors gong-concern model developed in the dissertation constitutes the core oftheory. Due to the unobservability of these three fa...