The Influence Of The Characteristics Of Enterprises With Historical Losses On Shareholder Wealth

The best protection for investors is to help investors realize the investment value and share the benefits of economic development.Therefore,the stability of shareholder wealth of listed enterprises is an important part of the protection of investors rights and interests,and it is also a key means to improve the quality of listed companies and promote the overall economic development.Inspired by the case of " re-listed first stock "-NANJING TANKER CORPORATION,this paper focuses on a special type of enterprises in China's capital market.The financial statements of these enterprises present a unified feature: the undistributed profits are negative,while the profit has been achieved continuous positive.This characteristic endows time attribute to enterprise losses.By combing the previous literature,we find that although the current domestic and foreign academic and practical researches have achieved certain results on the problem of enterprise losses,and also realize that the different attributes of loss will have different effects.But at present,no one has paid attention to the timeliness of the losses,and there is a lack of systematic research on the historical losses of enterprises.The profits of enterprises with historical losses have been continuously positive,and they are not loss-making enterprises.In addition,it emphasizes more on the state of maintaining profitability for companies,which is different from companies that turn losses into profits.Finally,it has the ability to make profits on its own,which strictly distinguishes it from zombie enterprises.As a kind of enterprises that have not been widely concerned and studied,the enterprises with historical losses are unique in in that they have large negative undistributed profits and continuously positive net profits.These two financial characteristics highlight the "historical" attribute of historical losses.Through statistics and analysis of enterprises with historical losses,it is found that the generation of negative undistributed profits generally takes only one to two years,but it takes a long time to make up for it.This is because the historical loss is not caused by the company's general daily operation errors,but because of the sudden loss caused by the economic environment,policy introduction,corporate strategy adjustments,management decision errors,and other uncertain factors.Limited by the huge amount of money,it can not be eliminated for many years in the future.The asymmetry in the generation and elimination of historical losses provides an opportunity for this paper to study the historical losses of enterprises.Enterprises with historical losses are burdened to move forward,limiting the development vitality of enterprises.At the same time,due to the provisions of the "Company Law" on the order of corporate profit distribution,enterprises with historical losses cannot make cash dividends.According to the “semi-mandatory dividend” policy of China's capital market linked to refinancing qualifications,such enterprises cannot conduct stock refinancing on the open market.Enterprises with historical losses are burdened with undistributed profits,and at the same time face the dual constraints of cash dividends and financing,which increases the business risks and pressures of the companies and poses a visible threat to shareholder wealth.Therefore,how to manage and control the risk of enterprises with historical losses,help enterprises resolve the burden of negative undistributed profits,and fully release the development potential and vitality of enterprises are of great significance to the creation of enterprise value,the protection of shareholder wealth,and the creation of welfare for the entire society.In order to in-depth study of the impact of historical losses on shareholder wealth,this article uses the characteristics of enterprises with historical losses as a perspective to study the specific influence mechanisms of enterprises with historical losses' financial characteristics,cash dividend constraints characteristics,and equity financing restriction characteristics on shareholder wealth,and further explore the protection of shareholder wealth feasible methods to protect the rights and interests of investors,improve the quality of listed companies,and provide solutions based on the perspective of specific types of companies.Based on the review of relevant theories and literature on the usefulness of accounting information decision-making,management entrenchment,dividend and capital structure,the research ideas of this article are constructed and the hypotheses of subsequent empirical studies are provided.This paper holds that the financial characteristics of negative undistributed profits in enterprises with historical losses have information value,which will affect the evaluation and decision-making of information users.The negative undistributed profits reduce the evaluation of the performance of the manager by the contract principal based on accounting information.Under the pressure of the position stability and reputation,the manager will have defensive behavior.This feature also implies the negative information of the enterprise's past operation and the uncertainty of future development,improves the creditor's assessment of the risk of enterprise default,and affects the investors' evaluation of the enterprise prospect.The negative information released from negative undistributed profits will affect the decision-making behavior of information users,which will clamp down the development vitality of enterprises and directly damage the shareholders' wealth.For the impact of financial characteristics on shareholder wealth,this paper uses OLS regression to test.According to the relevant content of the dividend agency theory,the dividend constraints of historical loss enterprises improve the managers' discretionary resources,which leads to managers' opportunistic behavior,and indirectly affects the shareholder wealth.Combining the literature on the impact of institutional factors on the capital structure,it is believed that the equity financing market control faced by enterprises with historical losses will increase the inherent risks and information asymmetry of the company,affect the creditors' assessment of the company's solvency and reputation,and bring debt financing constraints to enterprises,and indirectly damage the wealth of shareholders.For the impact of cash dividend constraints and equity financing constraints on shareholder wealth,this paper establishes a mediating effect model,and uses the stepwise regression method to test.Furthermore,there are differences in the size of the burden of negative undistributed profits,the duration of sustained profits,and the quality of profits among enterprises with historical losses.These differences determine the differences in the time of carrying forward and facing double constraints,as well as the differences in their ability to resolve the burden,which will have different degrees of impact on the relationship between historical loss and shareholder wealth.In addition,strengthening the self-construction of enterprises,including improving the level of corporate governance and information disclosure,adopting appropriate business strategies,and strengthening the construction of the external environment,including improving the capital market,increasing government support,can alleviate the damage of historical losses to shareholders' wealth in varying degrees,and become an effective means to protect shareholders' wealth of historical loss enterprises.This paper draws the following main research conclusions:(1)Compared with enterprises without historical losses,enterprises with historical losses have lower shareholder wealth.The greater the negative undistributed profit burden of historical losses,the greater the damage to shareholder wealth;the higher the profit quality of enterprises with historical losses,the weaker the damage to shareholder wealth.Strengthening the self-construction of enterprises,improving the level of corporate governance,the quality of information disclosure,and adopting prudent business strategies can alleviate the damage to shareholder wealth caused by historical losses.Strengthening the construction of the external environment,improving the capital market,and increasing the amount of government support can also alleviate the damage to shareholder wealth caused by historical losses.(2)Cash dividend constraints of enterprises with historical losses increase agency costs,which in turn damages shareholder wealth,and agency costs play an intermediary effect.The higher the dividend level of the enterprises with historical losses in previous years,the higher the agency cost,indicating that the agency cost of the enterprises with historical losses is caused by the cash dividend constraint.The greater the burden of negative undistributed profits of enterprises with historical losses,the higher the agency cost;the higher the profit quality,and the lower the agency cost.Strengthening the self-construction of enterprises,including improving the level of corporate governance,the quality of information disclosure,and adopting steady business strategies can reduce the agency costs of historical loss enterprises.Strengthening the construction of the external environment,including improving the capital market,and increasing the amount of government support can also restrain the agency costs of enterprises with historical losses.(3)The equity financing constraints of enterprises with historical losses have brought about corporate debt financing constraints,restraining the growth of enterprise debt financing level,and thus causing damage to shareholder wealth.When enterprises with historical losses have refinancing needs,the inhibitory effect of historical losses on debt financing is reduced.The greater the burden of negative undistributed profits of enterprises with historical losses,the stronger the inhibition of debt financing;the higher the quality of profit,which can alleviate the inhibition of historical losses on debt financing.Strengthening the self-construction of enterprises,including improving the level of corporate governance,the quality of information disclosure,and adopting prudent business strategies can alleviate the suppression of debt financing caused by historical losses.Strengthening the construction of the external environment,including improving the capital market,and strengthening the amount of government support can also alleviate the suppression of debt financing from historical losses.(4)In order to ensure the scientificity of the research results,this paper carried out PSM on enterprises with historical losses,and controlled the influence of self-selection problem on the research results of the damage to shareholder wealth caused by the characteristics of enterprises with historical losses.and uses the method of DID to prove that compared with the enterprises that have never suffered historical loss,that have experienced historical losses,after they get rid of the burden of negative undistributed profits,shareholder wealth will be significantly improved,and agency costs and debt financing constraints will be significantly eased.In order to ensure the robustness of the research results,methods such as changing the variable measurement and changing the sample were adopted to conduct the robustness test,and the results were all valid.Finally,based on the research results,this article puts forward corresponding suggestions on policy formulation,enterprise management,executive performance evaluation mechanism,external environment construction,etc.,to help enterprises with historical losses resolve the burden of negative undistributed profits,get rid of constraints,and release development vitality,create value,and protect shareholder wealth.It is of great significance to improve the quality of listed companies and realize the healthy and orderly development of the capital market.