| Financial risk is the possibility that an enterprise cannot compensate its debts preliminarily borrowed. Financial risk is a major part of financing studies, while expanding is a necessary process of enterprise growth. When expanding, an enterprise is facing various kinds of risks, especially financial risk. Financial risks in such situation are herein called Expansionary Financial Risk (EFR). For a company with an expansionary strategy and in the process of rapid expansion, the efficient recognition and prevention of EFR is a fundamental guarantee for its success. At the same time, as the economy of China is developing very quickly and getting into international standards, enterprise expansion in China is also coming into a new stage. Therefore, studies on EFR have been endued with very important practical meaning. It is in such a context that a study of EFR, which is composed of four parts and bears both theoretical and positive analysis, both representative and general analysis, is carried out with the support of the case study of Zheng Bai Wen(ZBW) event.Started with the general understanding of risks and the definition and classification of financial risk, the first part discussed briefly the basic theoretical problems in financial risk studies and established a starting point of the discussion on expansionary financial risk. The second part brought out explicitly the thesis of EFR and its connotation and scope. The cause of formation of EFR and its characteristics are discussed; the Southeast Asia financial crisis and bankruptcies of Korean enterprise groups are reviewed in a financing context; the importance of studying EFR in China is also discussed in this part. In part three, the case of ZBW is discussed from an EFR point of view. The history of the rapid expansion of ZBW and the breakout of the ZBW event is referred, both qualitative and quantitative analysis are made. A conclusion is made that the essential reason for ZBW's recession from its highest prosperity and falling into financial distress is the concentrated outburst of its EFR. Further introduction and analysis is made upon the recomposition set forth by Shangdong Sanlian Group with ZBW and how ZBW can break away from its financial distress. Based on the positive and theoretical analysis on EFR in the former parts, part four brought forward a set of approaches to prevent and remove EFRs. In the discussion of EFR prevention, special emphasis is given on aspects like rational expansion, process-warning, financial structure optimization, and the construction of financial governance system; for EFR removal, brief discussion is made on increasing working capital, liability regrouping, financial reforming, and capital replacement.In addition, this paper is seeking breakthroughs in the following aspects:1. In topic selection: combined with relative theories in management science and viewed from the overall enterprise strategy, financial risks are classified and expansionary financial risk as a new topic is put forward. The connotation and scope of these risks are discussed, causations are analyzed, and two characteristics of weak controllable and strong damaging are described. Financing review on the Southeast Asia financial crisis and the bankruptcies of Korean enterprise groups is made, and the relationship between EFR and the process that China's companies growing into 500 biggest companies of the world is analyzed.2. In positive analysis: combined with an analysis from all angles of EFR on the classic case of prosperous-recessionary process of a listing company in China, the Zheng Bai Wen event, financial risks existed in enterprise expansion processes in China are studied in a positive way.3. In the study on approaches of financial risk prevention: emphasis is given on key points; deep thinking and new discoveries are integrated into the rational expansion principle, new dimensions in warning concern, the making and description of liability scale, and the construction of financial governance system. |
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