A Study Of The Causative Mechanisms On Financial Distress In Enterprises Based On Financing Structure Perspective

Financial distress of Enterprises is a focus of finance sphere,which cause much failure and bankruptcy in the world and undermind the social and financial stability. However so fewer normative theories can explain the distress and its rootcause and mechanism that there's no unit and wide-understood framework to cope with this crisis.With prior theoretical foundation,this paper fisrt defined the financial crisis inenterprises and analyzed the traditional interpretation aiming to make the relationship between financial structure and enterprise finance clear.After introducing streamlined financing structure model, it is proved that the best structure indeed exists and ponted out best financing structure just meant value of enterprises maximizing or weighted average cost of capital minimizing.Based on the mechanism between financing structure and financial crisis,we draw a conclusion that severe deviation from streamlined structure is the root cause of crisis which provide economic and financial perspective for interpretating the micro mechanism of all kinds of crisis .And it validated the conclusion with the data of listed companies of China from 2006 to 2008. This article still proposed the corresponding measures against these crises.There are six parts, as followed:Chapter One discussed the research background, meaning, methodology mainly.In Chapter Two, this article mainly defined the concept, summarized the reasons, introduced the financing structure and indicated that microscope mechanism of crises can be interpretated from financing structure perspective.In Chapter Three the concepts were defined, outward manifestations were shown , explanations were gathered. In this part, it introduced streamlined financing structure model, verified the existing of streamlined structure, indicated streamlined one meant highest value or lowest cost, and concluded that divation from best structure will cause crisis.Postive research based on listed companies of China was done in Charpter Four.Choosing listed companies in 2006-2008 as sample and selecting measures reflecting operation and financing structure, this article testified the mechanism.The corresponding coping strategies were proposed in Chapter Five to keep companies away from distress, including micro and macro measures.Conclusion was draw in Chapter Six.