Research On Financial Risk Of Evergrande Real Estate Group Based On Diversified Operation

The current real estate market has been following the principle of "housing and living not speculation",the government has also introduced some relevant policies to step up regulation,such as the "three red lines" policy,because the industry has high leverage and debt ratio characteristics,credit policy tightening to the industry brought a blow is self-evident,many real estate enterprises have a series of financial crises,in order to solve the crisis brought by policy regulation,many housing enterprises adopt diversified strategic operations,in order to obtain synergies,so that the surplus value of enterprises is fully utilized,Get new performance growth points.Although the adoption of a diversification strategy has further developed the enterprise to a certain extent,it has also brought a certain degree of financial risk to the enterprise.For example,real estate companies are generally enterprises with high debt ratios,and adopting a diversified business strategy requires a large amount of capital to invest in new areas,which will make the pressure on the capital chain heavier.Evergrande Real Estate Group is an early enterprise that began to implement the diversified operation strategy,and is a leading enterprise in the industry,and it is involved in many new fields,so it is representative to choose Evergrande Real Estate Group as a case study of the financial risks brought by the diversified operation strategy of real estate.This paper first uses the literature research method to summarize and summarize the relevant theoretical knowledge of diversified operation and financial risk.Second,the process of diversified development of Evergrande Real Estate Group and the motivation for choosing a diversified business strategy are analyzed;Third,through the four dimensions of BSC,the financial risks of Evergrande Group’s implementation of diversified operation strategy were identified,and the factor analysis model and Z-score model were used to evaluate the financial risks brought by Evergrande Group’s implementation of diversification strategy,and the causes of problems were analyzed.Finally,corresponding suggestions are made on the financial risks caused by the implementation of the diversified operation strategy of Evergrande Real Estate Group.Through the four dimensions of BSC,it is identified that the financial risks of the group mainly include the continuous expansion of the main business scale but low profitability,the low solvency of diversified businesses,the low investment in R&D expenses,the excessive scale of debt financing of the group,and the main cash flow mainly from debt financing.There are four main reasons for induction: First,the group over-expands non-related diversified businesses,although it enhances brand awareness but does not highlight its core competitiveness;Second,insufficient attention is paid to the operation and management of some diversified businesses;Third,excessive reliance on debt financing,the use of perpetual bonds and off-balance sheet financing is too large,resulting in an imbalance in cash flow structure and falling into a serious debt crisis;Fourth,instead of following the policy to cool down the real estate,it took advantage of the synergy between the relevant diversified business and the main real estate business to continuously increase the amount of land reserve and overexpand the real estate business.According to the above problems,four targeted suggestions are put forward: first,reduce loss-making businesses and rationally invest in businesses to optimize the diversified layout,so as to highlight the core competitiveness;The second is to pay attention to the operation and management of the business,diversify the business should not rely too much on the financial support of the parent company,increase the cost of research and development,strengthen its own technical advantages,optimize the cash flow structure,and turn the primary source of the group’s cash flow into net cash flow generated by operating activities;The third is to optimize the financing structure,minimize the use of perpetual bonds and off-balance sheet financing to obtain funds,Introduce strategic investors or state-owned capital,and appropriately increase equity investment,strengthen the risk management brought by financing activities,and solve the current debt crisis step by step;The fourth is to follow the policy guidance to reduce the scale of real estate business.