Discussion On The Issue Of Over-Financing Of Political Affiliated Companies

In recent years,many of China's political affiliated companies face the risk of over-financing,even including emerging industries such as polysilicon,photovoltaic cells,wind power equipment and desalination etc.Taking photovoltaic industry as an example.Many regions have established dozens of photovoltaic industry park in just a few years.This excessive profits from emerging industries urge more and more enterprises to join the crazy chase.In China's current period,the government still plays an important role in economic activities and social life,and holds mangy important resources which can affect the survival and competitive status of many enterprises.While there are financing problems in plenty of enterprises,in this context,Enterprises are willing to get close ties with the government,and actively establish a political association with the government,to bring more favourable financing facilities,tax incentives,lower barriers to entry into the industry for the development of enterprises.The over-financing behavior of the political affiliated companies is tantamount to quenching a thirst with poison,which has a negative impact on the securities market,the government and the investors: the over-financing behavior can lead to the bank loans unable to exert the leverage management effect,the debt contract can not play the role of creditor protection;Over-financing behavior lead to the serious over-investment behavior of high-risk projects,which seriously damaged the interests of the shareholders of the company,the market shares of the company overall shrank and the financial liquidity seriously deteriorated,the company value seriously damaged;Under the condition of excessive financing of political associated company,a lot of money idle,which violate the investor's initial intention,seriously damage the interests of creditors and shareholders,greatly dampen investors enthusiasm about investing,and ultimately affect the interests of political affiliated companies.There are many reasons for the above problems,including the "overconfident" factors of the board of directors,the "paternalism" factors of the local government,the "supporting hand" factors of industrial policy,and the "excess liquidity" factor of the economic cycle.It is a realistic need of China's capital market to study the causes of over-financing behavior of political affiliated companies in our country and to seek the countermeasures to control this irrational financing behavior.This paper mainly uses the method of combining theoretical analysis and case analysis,the research ideas of put forward the problem-case analysis-draw conclusions,to research and analyze the over-financing case of political affiliated companies.In the theoretical analysis part,based on the analysis of a large number of research literatures at home and abroad,start with the relative concepts of political affiliates and excessive financing,and then draw forth the influencing factors of affiliated companies over-financing,deeply analyze theoretical situation of company over-financing under the background of political association.In the case analysis part,This paper choose the over-financing cases of Wuxi Suntech Group in the background of political association,which is the represent company in the photovoltaic industry of emerging industry,and introduces the case of over-financing of case companies under the background of political association,and summarizes the strategic motive of case company over-financing in the background of political association.This paper analyzes the factors influencing the over-financing,then deeply analyzes the mode of execution and economic consequences of the case company over-financing,and comprehensively understand the causes and consequences of over-financing of case companies in the context of political association.The paper is divided into five parts,the main contents are as follows: The first chapter is the introduction of this article,mainly introduces the research background and significance of this article,the review and comment of relevant literature at home and abroad,writing ideas and methods and the research framework of this paper.The second chapter is the summary of the theory of over-financing of political affiliated companies.It mainly includes the related concepts of political affiliated companies,over-financing,the influencing factors of over-financing of political affiliated companies and the theoretical basis of corporate finance.The third chapter is the introduction of Wuxi Suntech over-financing in the context of political association.Including the introduction of Wuxi Suntech,the political background of Wuxi Suntech over-financing,the over-financing predicament description of Wuxi Suntech under the political context.The fourth chapter is the case study of Wuxi Suntech over-financing under the background of political association.This chapter mainly introduces the strategic motive of Wuxi Suntech over-financing under the background of political association,the influencing factors,implementation mode and economic consequences of Wuxi Suntech over-financing under the background of political association.Chapter five is the conclusion of the study and the recommendations of governance.It contains three research conclusion: the overconfidence of management layer and corporate governance defects are main causes to Wuxi Suntech over-financing;government's preferential policy further contributed to the Wuxi Suntech Group's over-financing;government embedded effects which promote reckless expansion of the enterprise derived from over-financing.This chapter also includes four suggestions:strengthen risk prevention consciousness of enterprises,make scientific investment decisions;Standardize enterprise financing channels,improve the financing threshold;Improve the corporate governance structure,control the financing risk;strengthen the government's guiding role in the enterprise,reduce direct support from the government.