Superposition Of Financial Risk Under Maturity Mismatch And Major Shareholder Hollowing

In recent years,China’s MERGERS and acquisitions market has developed rapidly.More and more enterprises carry out mergers and acquisitions for long-term business strategies,among which the cross-border transformation into the financial industry accounts for a high proportion.The operation after the cross-border transformation faces significant opportunities and challenges,especially entering the high-risk financial industry.Therefore,based on the perspective of financial risk,this paper takes the case of Xishui Stock,the first cross-industry listed cement company that entered the insurance industry through merger and acquisition,and the huge operating loss after the merger and acquisition of Tian’an Property Insurance as the research object to study the motivations of merger and acquisition and the causes of financial risks after merger.It also provides some forward-looking suggestions and inspirations for regulators,insurance companies,M&A converters and small and medium investors.First of all,by sorting out the situation of Xishui Stock and Tian’an Property Insurance before the merger,it is concluded that there are three motivations for Xishui Stock to acquire Tian’an Property Insurance across industries: first,to improve the internal operating conditions and obtain new profit growth points;Second,adapt to the change of the external environment of strategic adjustment,enhance competitiveness;Third,realize collectivized capital operation and speed up the layout of the financial industry.Combing through the whole M&A case,we find that the M&A transaction is successful,but the poor operation after the M&A has intensified the financial risk,resulting in huge losses and the failure of transformation.Secondly,the financial risk analysis of the maturity misallocation of Tian’an property insurance shows that the maturity misallocation of Tian’an property insurance has the characteristics of short debt maturity and long investment maturity.With the rapid development of financial insurance business,Tian’an Property Insurance has formed a maturity mismatch mode,and the capital gap is not large under the condition of stable business sources and good investment profits.When the investment environment and business sources changed,the maturity mismatch of Tian’an Property insurance resulted in cash flow mismatch,declining profitability,substantial changes in assets and insufficient solvency,which greatly intensified financial risks.Then,the analysis of the financial risk of hollowing out by major shareholders finds that: Tian’an insurance group of major shareholders “tomorrow” in order to achieve the benefit maximization,the use of equity concentration control advantage,tian’an insurance capital source of extensive value can satisfy the financing needs of collectivization operation,by relating the way of investment and equity pledge is hollowed,lowered the level of cash holdings of tian’an insurance improving and assets impairment,the degree of earnings management,Intensified the financial risk of Tian’an property insurance.Finally,the superposition of the financial risk of maturity mismatch and hollowing by major shareholders shows that the financial risk of Xishui shares after the merger is significantly higher than that before the merger.The superimposition of financial risks after MERGERS and acquisitions has brought varying degrees of influence to stakeholders: the merger and acquisition parties failed in transformation and were put on risk warning of listed companies;The acquired party is in financial trouble and insolvent;The dominant position of the controlling shareholder decreases;Minority shareholders suffer.The fundamental reason for the failure of Xishui after its merger with Tian’an Property Insurance is the superposition of financial risks caused by maturity mismatch and hollowing by major shareholders.The financial risk overlay caused the cash flow mismatch at the business end,the overdue default of the investment trust and the asset adjustment caused by the defect of internal control,which caused the concentrated outbreak of financial risk and the financial dilemma of "insolvency" of Tian’an Property Insurance.