Private Enterprises In The Expansion Of M & A Funding Crisis

Chinese private-owned enterprises spent decades to become dominatein the new thriving market. Such a strong business power should make a lot ofcontribution to our economy. However, to our surprise, many cases showedthat cracks on the capital supply chain directly lead to the collapse of business.This thesis would analyze the financial factors for the failed cases.Because of the defects of Chinese financial system, these private-ownedenterprises are difficult to finance from external resources. Their financingmainly depends on self-capital financing. In order to expand rapidly, manyprivate-owned enterprises integrate the business through mergers andacquisitions. No-market capital market is the external factor for the fracture ofcapital chain, while poor cash flow is the internal factor. Another moreimportant factor is to put short-term loan to long-term project use. All thesefactors increase the cost and risk of capital. It is urgent for supervisingauthorities to develop policies to regulate the financial market and improvethe function of emergency caution and control. The private-owned enterpriseswould combine the industry and financing together to run a better business aslong as they balance the business expanding and financial support properly.