The Study Of Causation And Solution Of Financial Distress For China COSCO Company

Financial distress theory has become one of the forefront and hot issues of capital structure theory. Financial distress, also known as the financial crisis, has the most serious cases called bankruptcy. Research about company’s financial difficulties in China are just in the begging phase,there still a gap between Chinese research and developed countries ’research, no matter in the research perspectives or research methods. Under the condition that domestic financial distress research lack of empirical case but only has xxx, this essay starts with the redefinition of financial distress and applies related theories to practical research on the base of certain company. Therefore to identity their financial difficulties and propose targeted solutions, while providing a reference for other companies to achieve scientific development.As an important foundation and service sector of China’s economy, the shipping industry makes great contribution to China’s foreign trade development and the position of the major trading nation in the world by providing convenient transportation services. The vicissitude of shipping industry has close relation to the economy, trade sector, and government policies of both domestic and foreign countries.In recent years, affected by the slowdown of global economy, as well as the international shipping market downtown and severe overcapacity and several other factors, China’s shipping industry has met a sharp deterioration in the macroeconomic environment and the overall situation. In2012, the public annual report released shows that more than80%of the12listed companies suffered a loss and fell into serious financial difficulties. The great loss of those listing companies not only affects company’s stock price, but also weakens the confidence of creditors and investors. If no effective measures are taken to stop further deterioration, there is a risk of delisting.This essay selects one of those listing companies which meet financial problems-the China COSCO Holding Company Limited, to do an autopsy research to reveal the reason and process of its financial difficulties, which can also provide a common reference to other companies in the shipping industry. Based on the the results of both home and abroad research, this paper first defines what the research applies for, then analyses China COSCO Holding’s financial problems in terms of debt capacity, profitability and operational efficiency with mass data. After doing deep research through both external and internal factors that affect, this paper reveals the reasons that cause financial distress. Afterwards, this paper proposes suggestions for short terms in view of getting rid of financial difficulties and avoiding delisting, and for long terms, in terms of improvement of scientific growth and maximizing entity value. Finally, a summary is given for the whole case.This paper has contains seven sections:The first section is introduction, which introduces research background, purpose, significance, research methods and contents.The second section is literature review, which gives a review of related home and aboard researches and literatures that analyze the reasons and solutions for financial distress.The third section first introduces the theory and the definition of financial distress, then gives the new definition for financial distress which combines the results of related research and writer’s own research. After that, an elaboration of theories about financial distress is given in the end.The fourth part is introduction and analysis for the case, which contains the introduction of*ST China COSCO and characteristics and risk of shipping industry.The fifth part is reason analysis of*ST China COSCO in financial trouble, this paper analyzes the reasons from two aspects of the external environment and internal management of the financial distressed, specifically the outside reason includes the downturn in the economic environment, the imbalance of supply and demand, price index downturn, fuel oil prices soared, and the RMB exchange rate is rising reasons, the internal reasons included business section layout is not reasonable, management decision-making error, cost control and other aspects.The sixth part puts forward several countermeasures to control financial risks. To enrich practical value, this paper propose solutions for avoiding shot-term delisting and the long-term maximizing of company value and hopes to provide several constructive suggestions for other companies in shipping industry.The seventh part is summary for the whole case, which summarizes the writer’s thoughts and research resultsThis paper focuses on the selection of relevant indicators and the analysis of indicators in the perspective of finance; the hardest part is to give proper definition for research on the basis of many scholars, and to reveal the reasons and suggestions for*ST China COSCO’s financial distress.