Analysis On The Motivation And Effect Of Zero Leverage Financial Strategy

In recent years,with the vigorous development of China’s economy,the special financial strategy of zero leverage,which is regarded as extremely conservative,has not been replaced by traditional financial strategies,but has increasingly been adopted by many listed companies.Moreover,this phenomenon also widely exists in developed capital markets in Europe and the United States,causing widespread attention by scholars at home and abroad.The zero leverage financial strategy refers to a special capital structure in which the total of an enterprise’s interestbearing liabilities is equal to zero,that is,the total of short-term borrowings and long-term borrowings in the balance sheet is zero.Among them,short-term borrowings mainly include short-term loans and non current liabilities due within one year,while long-term borrowings mainly include long-term borrowings and long-term bonds payable.Based on agency cost theory,MM theory,management cybernetics,and other theories,this article selects Fuling Jucai,a representative enterprise in the food manufacturing industry in China’s A-share market that adopts zero leverage financial strategy.Through analyzing and summarizing relevant literature on zero leverage financial strategy,combined with case companies,it explores the motivation for choosing zero leverage financial strategy,implementation path,and effectiveness evaluation of zero leverage financial strategy.This article mainly includes six parts:The first part is an introduction,which mainly introduces the research background and significance of this article,and summarizes relevant literature.The second part mainly describes and introduces the relevant theoretical concepts in detail,as well as the theoretical basis.The third part focuses on analyzing the basic situation of the case company and the reasons for selecting the case company.The fourth chapter is based on the motivation,implementation path,and risk control analysis of the case company’s choice of zero financial leverage.The motivation for Fuling pickle to choose zero financial leverage is mainly based on sufficient endogenous financing to reduce the financing cost of the enterprise.Fuling pickle is a leading enterprise in its industry,with excellent performance in terms of profitability,cash flow quality,and operating capacity.Through financing methods based on endogenous financing,it also helps the enterprise reduce its own financing cost;The state-owned holding background of Fuling Zhacai and the inherent requirements of the management to improve the defense distance also make it adopt a zero leverage financial strategy to meet its stable development strategy;At the same time,due to maintaining financial flexibility and reducing corporate financial risks,Fuling pickled vegetables have adopted a zero leverage financial strategy.Regarding the specific implementation of zero leverage financial strategy in enterprises,this article mainly describes the specific implementation path from investment,financing,working capital management,and dividend distribution policies,aiming to clearly analyze the implementation path of zero leverage financial strategy in Fuling pickled vegetables.At the same time,in order to ensure the implementation of the zero leverage financial strategy,the risk control analysis of Fuling pickled vegetables is also an important part of this article.The fifth chapter focuses on the performance analysis and effectiveness evaluation of the zero leverage financial strategy for Fuling pickled vegetables.The performance analysis is mainly based on the analysis of debt repayment,cash flow,profitability,operation,and growth ability;The effectiveness evaluation focuses on financial risk control,enterprise strategy promotion,enterprise core competitiveness analysis,and enterprise value creation.Finally,based on the above analysis and demonstration,the following conclusions are drawn: First,the adoption of zero leverage financial strategy by enterprises ultimately serves the enterprise strategy,which is an important component of the enterprise strategy.The second is that the zero leverage financial strategy helps to control corporate financial risks.Third,the zero leverage financial strategy helps enterprises create value.Although Fuling pickled vegetables have achieved several positive effects by adopting a zero leverage financial strategy,for enterprises that want to adopt a zero leverage financial strategy in the future,it is necessary to reasonably select a zero leverage financial strategy based on their own financial characteristics;At the same time,at the government management level,it is necessary to actively reduce the financing costs of enterprises and alleviate the financing constraint effect;Moreover,for the management of Fuling pickled vegetable enterprise itself,it is necessary to reasonably improve its corporate governance structure,actively adjust its risk appetite to adapt to the internal and external environment of the enterprise,and maximize its value.