Study On The Impact Of Enterprise High Growth On Financial Crisis

As the penetration of the system of market economy and the rapid development of the capital market in China, national economy has realized the sustainable and high-speed growth. In the context of the macro-economic environment, the listed companies in China grasp the opportunity to realize their own development among different industries, and most companies has achieved high growth of the operating income. However, the high growth covers companies'accumulated credit risks with rising debt ratio. If one company just tries to pursue the infinite growth, the enterprise value will not be increased. Oppositely, the high growth may cause the resources shortage and incapability of the management and bring unexpected negative influences to the company. In case the manager can't guard against the attendant risk, the company may probably be caught in financial crisis and then go into the bankruptcy in the end. For these reasons, it is essential to analyze the relationship between the high growth and companies' financial resources and then based on the analysis; investigate the influence of high growth on the financial crisis.Based on the Higgins sustainable growth model, this article defines the high-growth. On the analysis of financial sustainable growth theory, we select the four financial ratios and the issuance of new shares as the explanatory variables of the regression model to analyze the correlation between the high-growth and financial resources. According to the regression results, we can know that the financial resources needed during the high growth process mainly come from the support of internal financing and debt financing. The debt financing is the preference of the companies in China during their process of development. Then, based on the theory of capital structure and the analysis of the reasons causing the financial crisis, we propose the research hypothesis and select the Z-score (being seen as the variable representing the occurrence probability of the financial crisis) as the explained variable, over-speed growth factor as the explanatory variable and a serial of related control variables about the enterprise earnings, financial leverage, cash flow, corporate governance and the scale of company. Then we set up the multivariate regression model to do the empirical test. The results show that the over-speed growth factor is negative correlated with Z-score significantly. According to the definition of Z-score, the larger the Z-score is. the more likely the financial crisis occurs, vice versa. Therefore, the empirical results indicate there is significant positive correlation between the high-growth and the occurrence probability of the financial crisis. Thus, the research hypothesis of this article has been verified, i.e. the financial crisis's occurrence probability of the high-growth company is significantly higher than the low-growth company's.Based on the research results of this article, the company should strength the management of enterprise growth rate. Besides, the managers should improve the understanding of the company's sustainable growth, and tradeoff the attendant benefits and risks to find the equilibrium point of the growth. At the meantime, the company should improve its performance evaluation system and perfect its risk management system. In addition, the company has to optimize its allocation of financial resources, and pay special attention to the management of cash flow.