Research On The Mechanism Of Enterprise Financial Crises

Due to the changes of the inner conditions and the outer circumstances, anenterprise survives and develops at risk all the time. Along with the intensifying of theglobal market competition, enterprise bankruptcies and failures are increasingstructurally in the whole world. In china, enterprise financial crises and operationfailures have greatly increased the unemployment and seriously damaged the socialand financial stability from the beginning of the reform and open.But up till now, few normative theories can successfully explain the causes ofenterprise financial crises and there exists no unified and popularly acceptedtheoretical basis for the studies on financial crisis forewarning. The source is that sofar the explanation of enterprise financial crises has been still staying at the surfacelayer of factors analyzing, causes classifying and processes describing, and no deepprobe into the micro mechanism of the forming and evolving of enterprise financialcrises has been in progress. Therefore, the research on the mechanism of enterprisefinancial crises is of great theoretical and practical importance.In the dissertation, the multi-discipline knowledge of cybernetics, systems theory,nonlinear complexity science, management science, forewarning management theory,the science of law, philosophy, and so on and the engineering methods of systemsmodeling and simulation were synthetically applied, and the thinking and methods ofsystem sciences were especially emphasized. The dissertation did not base on anyrelated theories or achievements now available but started with the creating of thebasic enterprise value flows model(BEVFM), qualitatively and quantitativelyanalyzed the acting points, ways, strengths and conducting processes of various forceswhich affect the basic enterprise value flows; then on this basis, utilizing thedisciplines of system sciences, the mechanism of enterprise financial crises wasprobed and taking the JX Steel Tube Co. Ltd as an example, the forming and evolvingprocesses of enterprise financial crises were simulated; in the end the generalexplanation of enterprise financial crises was abstracted and the forewarningmanagement principles based on the mechanism of enterprise financial crises werestudied.In brief, the mechanism of enterprise finance crises can be expressed asfollowing:As a kind of complex non-linear systems, enterprises are always subjected to various inside or outside, positive or negative value forces; the positive value forcesimprove an enterprise's financial conditions and enhance the enterprise's financialrobustness, the negative value forces worsen an enterprise's financial conditions andweaken the enterprise's financial robustness, and these value forces intertwine andcouple mutually and determine the enterprise's financial conditions and thedeveloping direction together; due to the non-linearity, there intrinsically exists thefinancial critical point, at which the amount of enterprise negative "the joint effort"equals that of the enterprise's financial robustness but their directions are opposite,and once "the joint effort" surpasses this point, the enterprise will enter the financialcrisis and fall into in the self-reinforcing vicious circle due to the positive feedbacks,so that it is difficult for the enterprise to extricate from the crisis without substantivelarge-scale reorganization; though the ultimate result of the worsening of theenterprise finance crisis is the bankrupt or liquidation, an enterprise finance crisis isnot unidirectional and positive value forces, especially effective intervention measures,can change the developing direction of the enterprise finance conditions and make theenterprise jump out of the vicious circle and present the nature of the relativereversibility, which also lay the foundation of the limited controllability of theenterprise financial crisis and certainly determine intrinsically that the enterprisefinance crisis forecasting is impossible to be absolutely accurate; because the greatmajority of enterprise finance crises are chronic and their roots lie in the enterprises'own system defects, the financial crisis forewarning management should adhere to theprinciple of "internal cause be fundamental"; on account of the malignantconsequence and the difficulty of getting rid of financial crises, the people shouldadhere to the principle of "putting prevention first" and strengthen the financial crisisforewarning management. This is the multi-factors coupling idea of financial crises.The main achievements in the scientific research consist of:(1) BEVFM, which includes model hypotheses, model structure, mathematicalmodel and so on. It describes the processes of enterprise value flows systematicallyand becomes the basis for the further qualitatively and quantitatively studying and theimportant tools for enterprise value flows simulating, financial crisis forecasting,decision supporting and so on.(2) the mechanism of enterprise financial crises, which compries the systemmodel of enterprise financial crises, the conducting models of various forces, therobustness of enterprise finance, the critical conditions for the occurring of financial crises, the simulating model of enterprise value flows and some significant simulationfruits. The research is of importance to enterprise financial crisis forewarningmanagement and especially the system simulation combined with enterprise referencemodels may open up a new way to enterprise strategy-deciding, planning, forecastingand risk-managing.(3) the general explanation of enterprise financial crises, which is made of thecauses and characteristics of enterprise financial crises, and multi-factor couplingidea.(4) forewarning management principles based on the mechanism of enterprisefinancial crises, which consist of the forecasting ability of financial ratios to enterprisefinancial crises, the producing and releasing of financial forewarning information, andthe enterprise-interior-oriented financial crisis forewarning management system.