Government Regulation,Industrial Competition And Corporate Financial Risk Derivation

This paper studies the mechanism,path and effect of the interaction between government regulation,industrial competition and corporate financial risk derivation.China's economy has shifted from a high-speed growth stage to a high-quality development stage.At present,China's economy is in a period of tackling the development mode,optimizing the economic structure,and transforming the growth momentum.Under the background of the economic system reform,the relationship among government,market and enterprises is still a focus of contemporary theoretical researchers and economic regulators in China.In this context,based on industrial organization theory,regulatory economics theory and corporate finance theory;combining the basic characteristics of industrial development and the objectives of government regulation in emerging markets(represented by China)and mature markets(represented by the United States);using all data from listed companies in China and the United States from 2001 to 2015,this paper conducts a series of empirical tests and comparative analysis.The research findings in this paper are as follows:1)There is a break in the transmission chain of China's industrial competition that affects the vertical derivation of corporate financial risk.The break is that industrial competition does not play a significant predation effect and governance effect.In the U.S.,the greater industrial competition is,the deeper the vertical derivation of corporate financial risk is,which indicates the predation effect is stronger than the governance effect.2)In China,the strong government corporate regulation brings deepening corporate financial risk,and this impact weakens the role of industrial competition;the strong government industry regulation also brings deepening corporate financial risk,and there is a mutually reinforcing relationship between the effects of industrial regulation and competition.It means that,in China,the competition environment may be endogenous to the regulation environment.The US government industry regulation can significantly reduce the financial risk of enterprises;and it doesn't have a significant impact on the relation between corporate financial risk and industrial competition.3)In China,industrial financial risk moves reversely with financial risk of a single enterprise.The horizontal derivation of latter is mainly reflected as competition effect;while in the US sample,the competitive effect is verified,but not as robust and significant as in the Chinese sample.In China,the competition effect increases with industrial concentration;while in the US sample,the industrial competition does not have a significant effect on the horizontal derivation of corporate financial risk.In the Chinese industry,the horizontal derivation process of corporate financial risk does not have a significant impact on the degree of industrial competition.The reason for this phenomenon may be that market competition mechanism is not sensitive to financial risk of individual enterprises.While in the U.S.,the smaller industrial financial risk brought about by the derivation is,the greater the degree of competition in the industry is.4)In China and the United States,a strong government regulation will weaken the competition effect of the horizontal derivation of corporate financial risk.However,the source of this weakening effect is different.In Chinese market,it derives from the industrial financial risk brought about by government regulation,while in the US market,it derives from the strong industrial competition coexisting with government regulation.In Chinese industries,the smaller industrial financial risk brought about by the horizontal derivation is,the less likely the industry is regulated by the government.This is determined by the reducing industrial financial risk target of “public regulation”.In the US industry,the smaller industrial financial risk is,the greater possibility the industry will be regulated by the government.This phenomenon can be explained by the Regulation of Captive Theory.In the Chinese market,there is a “Mobius positive distortio” in the linkage of corporate financial risk,industrial competition and government regulation,and this distortion occurs in the process of government regulation affecting the corporate financial risk-government regulation should reduced corporate financial risk.But it works conversely due to the existence of regulatory constraints.In the US market,there is a “Mobius negative distortion” in financial risk derivation,industrial competition and government regulation linkage mechanism,and this distortion occurs in the process of industrial financial risk adversely affecting government regulation-industries with low financial risk do not require excessive government regulation.But it goes conversely due to the existence of regulation captive.Comparing the emerging market with mature market,this paper promotes the reconsideration of the research paradigm of industrial organization,the thinks about the development direction of regulatory economics,and the supplements of corporate finance theory.This research provides a theoretical reference for enterprises to locate the key points and adjustment directions of financial risk management in different government regulation and industrial competition environments;provides a comparative optimization strategy for risk management and for the improvement of China's industrial benign competition mechanism;provides a dynamicconsistent choice of and a coordinate-equilibrium role for government regulation.