The Research On The Effect Of Cash Flow Volatility On Enterprise Value

Cash flow has a pivotal position in the enterprise financial management, thus it has become a study focus in this major. Cash flow is the premise and foundation of the enterprise operation process, whether cash flow is stable or not will decide enterprise’s investment and financing behavior and the dividend policy of the enterprise, thus influence enterprise value, so the cash flow management is very important in the process of enterprise management. Manufacturing industry is the dominant force in a country industry,our country is also relatively developed in the manufacturing industry, and in the Shanghai and Shenzhen listed companies in our country, the number of manufacturing enterprises is one of the most. With the financial crisis gradually spread to the global since 2008, China’s manufacturing industry has received the unprecedented impact. Some manufacturing enterprises have appeared financial situation deteriorates, also appeared the unprecedented volatility of cash flow and these enterprise value have been all the way down. So some of them had to declare bankruptcy, and this situation also caused a lot of loss to investors.Therefore, in order to maintain manufacturing listed companies to continue as a going concern, also in order to maintain the interests of small and medium-sized investors, to study the effect of cash flow volatility on the enterprise value is particularly important.This paper research the effect of cash flow volatility on the enterprise value based on the data of Shanghai and Shenzhen A-share listed companies in Chinese stock market, and insisted on the principle of combining theory with practice, combined methods of normative analysis and empirical research. This paper analyzes the domestic and foreign scholars’ document literature on enterprise value, the cash flow volatility and the effect of the latter on the former, and this paper set from the perspective of enterprise risk management, combined with the related theory of financial statement analysis, respectively from the angles of theory and empirical research the effect of cash flow volatility on the enterprise value, in order to continue to enrich the related theory and research about this thesis. This paper set from the perspective of enterprise risk management, combined with the enterprise’s profit ability, growth ability, operating ability and solvency etc., to probeinto cash flow volatility’s influence on the enterprise value evaluation, and make a rank of the factors according to the importance. Study conclusion shows that cash flow volatility negatively related with the enterprise value, and the rank of influence factors of enterprise value roughly is leverage effect, operating ability, profit ability, the company size, growth ability, solvency. This paper regarding the manufacturing listed companies as the research object, hope find the effect law of manufacturing listed companies cash flow volatility on the enterprise value, and on the basis of predecessors’ research, enrich and develop the research theory of cash flow management, also can enrich the theoretical foundation of the influencing factors of enterprise value, and service for manufacturing listed companies better.This paper has three purposes. on the one hand, provides cash flow management theory support for enterprise management especially the risk management, in the basis of traditional enterprise management which regard profit as the core, guides management to attach great importance to risk caused by the cash flow volatility and to strengthen the control of its, through establishing stable cash flow to enhance enterprise value; on the other hand, the research and analysis of cash flow volatility also provides reference for investors to the valuation of listed companies, especially for investors interested in manufacturing industry. Manufacturing industry investors should be fully found the risk of cash flow, on the basis of the financial indicators analysis combining with the analysis of cash flow volatility, understand the risk of operation and management of manufacturing listed companies more comprehensive, thus evaluate and make corresponding investment decisions reasonable; moreover, provides certain reference significance for the asset appraisal institution to evaluate manufacturing industry enterprises.