Research On Financial Risk Of GEM-Listed Companies

GEM in China Mainland established finally with the China Securities Regulatory Commission issued《Initial public offering and listing on the GEM Interim Measures》in the March 31rd,2009. GEM (Growth Enterprises Market) board, the name suggested, focusing on entrepreneurship, is a market in order to meet the needs of growing entrepreneurial companies and other established development business. GEM board makes independent innovation enterprises and other growth companies as servicing target different from the board that only accepts mature companies which have formed a sufficient scale to list on. GEM board's listing requirements are significantly lower than the main board and the small board. GEM is more suitable to SME (Small Middle Enterprises) whose setting up time is shorter, smaller, temporarily outstanding performance, but promising, with high growth potential. Eligible SME on the GEM can effectively solve the problems of corporate finance, strengthen enterprise strength, expand the brand influence, and promote enterprises to develop rapidly and healthy.The listed companies on the GEM are also facing the financial risk the same as the listed companies on the main board and the small board. According to the characteristics of the listed companies on the GEM, in the start-up period, private enterprises, small- scale, the funds are not sufficient, no more earnings results, and some businesses in emerging industries or sectors, non-mature, their financial risk is great. There should also be considered to strategic risk, market risk, operational risk and legal risk, as these risks will eventually lead to financial risk. Therefore, we have given a high priority to the financial risk of listed companies on the GEM.Existing research on financial risk was mostly limited to state-owned enterprises, listed companies, SME, high-tech enterprises and so on. The articles about specializing in financial risk of listed company on the GEM were very few. Therefore, this article standing on the listed companies' own point of view on the GEM, integrating the characteristics of the listed companies on the GEM, studied the financial risk. This paper used the method of combining with studies and empirical. Firstly, using induction and deduction method to summarizes the domestic and international research profile, lack of induction studies appeared; secondly, introduced the basic theory of financial risk and the GEM; thirdly, interpreted the concept, classification, status in risk management of company, causes of financial risks about the listed companies on the GEM; and then with the analysis method of fuzzy mathematics, taking a listed company on the GEM as an example, identified the degree of company's financial risk; finally, proposed ways to prevent financial risks. The purpose of this paper is to guide more companies to success listing on GEM and prevent the occurrence of delisting.