Research On Financial Criss Contagion And Prediction Of Enterprise Group

With the rapid development of China's market economy,more and more enterprises form and establish business groups through mergers,acquisitions,investment,holding and so on.Business groups have gradually become the hard core of China's economic growth.As a high-level form of modern enterprise,business group has many advantages,such as strong capital,powerful strength,reducing transaction costs,easy to realize the optimal allocation of resources and so on.It can optimize the allocation of resources and resist risks in the fierce market competition.Therefore,it has been widely concerned by the practical circles.It has attracted many scholars to study it.Literature has focused on business distribution,earnings management,cash holdings,over-investment,internal capital transactions,profit transmission and so on.Few scholars have studied the contagion effect and prediction ability of financial crisis among members of business groups.However,according to the total FSI index of Themis non-financial listed companies,the overall financial security of China's non-financial listed companies in 2017 was the worst year in the last decade.This shows that the study of financial crisis is more and more important,especially for the business group financial crisis causes and forecast research is imminent.The main reason is:compared with non-business group,the formation of financial crisis of business group is not only affected by its own factors,macro factors,but also by other members of the same business group.By the logically speaking,when one or more companies in an business group have a financial crisis,it is very likely to influence and spread to other business group members,which is determined by the nature of the business group itself,because generally speaking,the business of group members is more closely related to each other.Mutual guarantee is also common.However,in the real society,there are also a lot of group financial crises among the members of business groups,which are prone to the "domino effect".With the rapid development of business groups,the number of rapid increase in the course of development of more than ten years,business groups continue to encounter a variety of new problems,the most prominent is how to deal with the financial crisis,how to quickly adjust the strategy when the crisis is approaching,whether by optimizing the allocation of resources to break the predicament,and then suddenly Breaking the bottleneck of enterprise development has gradually become the focus of attention.Scholars in the theoretical circles often only focus on one aspect of the enterprise,rather than considering the internal structure of the entire business group,resource allocation and other issues to study,it is difficult to meet the practical entrepreneurs to explore the causes of the financial crisis of the business group and solve the needs of countermeasures.Therefore,based on the theory of contagion effect and the theory of financial crisis early warning,this paper studies the contagion effect of financial crisis of business groups,analyzes the influence of the special characteristics of business groups on the contagion effect of financial crisis,and applies the contagion effect and the adjustment effect to the financial crisis early warning,and puts forward the suggestion that it should be specially aimed at business groups.A new model for early warning of financial crisis.Based on the theory of business group,the theory of contagion effect and the theory of financial crisis early warning,this paper combs the existing financial crisis early warning literature and the related literature of risk contagion,finds the breakthrough point of risk contagion and financial crisis early warning,and combines the efficiency of internal capital market of business group.This paper reviews the internal control system and corporate governance from three perspectives,summarizes the characteristics and shortcomings of existing literature,and puts forward the possible point of penetration and expansion direction.The concrete research contents are as follows:Firstly,this paper analyzes the contagious effect of financial crisis among the members of business groups.Considering the lag effect,we find that the contagious effect of financial crisis lasts for three years,and the closer the time is,the greater the contagious effect is.Further tests show that the contagion effect of financial crisis can be concluded by using a variety of crisis measurement methods.And the contagion effect of financial crisis only exists in the real business group,and there is no contagion effect of financial crisis in the same industry and the same scale virtual business group.When considering the strategic characteristics of business groups,it is found that the contagion effect of specific financial crisis based on management-oriented enterprise is significantly greater than that based on investment-oriented business groups.Further study of the contagion path shows that the financial crisis of business groups is contagious by increasing the related transactions of goods and services,funds and guarantees,debt financing costs and long-term equity investment.Secondly,improving the efficiency of internal capital market can reduce the contagion effect of financial crisis.According to the grouping of government levels,it is found that there is no significant difference in the regulation effect of the efficiency of internal capital market between non-government-controlled business groups and government-controlled business groups on the contagion of financial crisis.It should be larger than local state-owned business groups.When considering the strategic characteristics of business groups,investment-oriented business groups,the efficiency of the internal capital market to regulate the role of significantly greater than the management-oriented business groups.Optimizing the internal control system can effectively restrain the contagion effect of financial crisis,and the closer the geographical distance,the greater the contagion effect of financial crisis.Considering the lag effect,we find that the restraint effect of internal control on the financial crisis is reflected in T-3 years,while the regional proximity and industry nature only exist in T-2 years.Finally,by adding contagious variables and adjusting variables into the existing financial crisis early warning model,the prediction ability of the model has been significantly improved.Considering the forward-looking effect of forecasting ability,it is found that the forecasting ability of the model is still improved when T-2 and T-3 years data are used to forecast the financial situation of T-year business group members,considering the contagion effect and moderating effect between members.Further considering the nature of property rights,we find that the prediction ability of the model has been improved.When adopting different financial crisis measurement methods,we can get the conclusion that the prediction ability of the model is improved.When using the same industry and the same size of independent companies as the sample companies to build a virtual business group analysis,it is found that the prediction ability of the model does not change after adding the indicators which reflect the basic financial situation and extreme financial events information of the business group.This fully proves that the indicators considering the basic financial situation and extreme financial event information of business groups are only applicable to the prediction of financial crisis of Listed Companies in business groups,but not applicable to non-business groups.The possible innovations and contributions of this paper are embodied in three aspects:Firstly,compared with the existing research,this paper reveals the existence of contagion effect of financial crisis among enterprise integrators for the first time,and further enriches the relevant literature on contagion effect and causes of financial crisis.The existing literature on contagion effects mainly concentrates on the macro-level of exchange rate risk contagion,subprime mortgage crisis contagion,financial industry,capital market contagion,and so on.Only a small number of literature studies on the contagion between firm performance.This paper can enrich the demonstration of the existence of contagion effects at the micro-level.The microscopic existence of infectious effects.At the same time,the existing literature on the causes of financial crisis,mainly focused on the macro-environment,industry factors,poor management,rapid growth and other aspects,and are all aimed at independent enterprises,few literature from the perspective of contagion effect of crisis contagion the impact of financial crisis among business group members.This article enriches the research on the mechanism of contagion effect on financial crisis.Secondly,this paper further studies the governance mechanism and contagion path of corporate financial crisis contagion effect.It expands the research on the governance effect of existing business groups.It also provides a new theoretical support for the practical circles to understand the operation and governance of business groups.Thirdly,based on the research on the improvement of the existing financial crisis early warning ability,combining with the financial crisis early warning model,this paper puts forward a new financial crisis early warning model for business group members,and fully proves its role in enhancing the financial crisis early warning ability.It opens up a new train of thought for the financial crisis early warning of business groups,and provides a new perspective for solving the financial crisis prevention of business groups in the real society.Fourthly,this study provides a new reference for bondholders,investors and credit rating structure of business group credit rating.The existing credit evaluation methods for business groups mainly use the financial data and non-financial data of the consolidated statements of business groups,while ignoring the contagious effects of financial crises among business group members,this study can make up for this gap.