Liquidity Risk Measurement And Evaluation Of Evergrande Group

The real estate industry is the fundamental and leading industry of the national economy,which is related to urban development and the improvement of people’s livelihoods.Since the Central Economic Work Conference was held in December 2016,adhering to the principle of "housing without speculation" has become the main theme of policy regulation in the real estate market.Preventing financial risks in real estate is not only a practical need to "stabilize land prices,house prices,and expectations",but also conducive to building a long-term mechanism for the healthy development of the real estate market.However,since 2020,the global economy has suffered a serious recession due to the impact of the COVID-19,China’s real estate market has also suffered a severe impact,and the liquidity crisis has spread among real estate enterprises.According to Wind data,the total default amount of real estate enterprise bonds in 2020 reached 28.17 billion yuan,a year-on-year surge of 533%.Real estate companies such as Zhengrong Real Estate and Taihe Group have successively experienced liquidity risk events such as debt rollovers and defaults,and Evergrande Group,as a leading enterprise in the real estate industry,is no exception.Due to the huge liquidity gap of Evergrande Group,and the multiple impacts of pessimistic market opinion,debt intensive maturity,and lower stock price expectations,its liquidity crisis continued to ferment,and it was finally announced to suspend trading on March 21,2022.Liquidity risk,as a common risk in real estate enterprises,has the characteristics of fast spread,strong concealment,and high harm,and is one of the important sources of financial risks that induce real estate enterprises.Therefore,accurately measuring,evaluating,and analyzing the liquidity risk of Evergrande Group not only has certain guiding significance for improving its own liquidity risk management,but also can provide certain reference for other real estate listed companies.Therefore,this article focuses on the following aspects: Firstly,by reviewing relevant domestic and foreign literature,feasible research methods and ideas are provided for the subsequent measurement and evaluation of Evergrande Group’s liquidity risk.Secondly,taking Evergrande Group as the research object,first introduce the process of Evergrande Group’s liquidity risk events,and then qualitatively analyze the causes of Evergrande Group’s liquidity risk from the perspectives of internal and external reasons,in order to identify the crux of its liquidity risk.Thirdly,in order to ensure the accuracy and timeliness of liquidity risk measurement,in terms of weight setting,time-varying weighting is carried out on the asset side and liability side respectively,in order to construct a liquidity risk index containing time-varying weighting factors for measuring the liquidity risk of Evergrande Group.Fourthly,first of all,take the top 50 listed real estate companies with comprehensive strength in the real estate market as the sample object,use the liquidity risk identification index to classify the level of liquidity risk,and compare and analyze Evergrande Group and the overall real estate market.Then,the liquidity risk index measured in the above text is used as sample data,and different market shocks are simulated by changing the standard deviation of the weighting factor.This is used to conduct stress testing on the liquidity risk of Evergrande Group and achieve evaluation results.Fifthly,after conducting research on the causes,measurement,and evaluation of liquidity risk in Evergrande Group,conclusions are drawn and targeted recommendations are proposed.This study found that:(1)Evergrande Group had a high level of liquidity risk during the sample period.From the overall trend,the liquidity gap of Evergrande Group was negative for the first time in 2016.Starting from 2018,the liquidity gap gradually expanded and reached its peak in 2020;(2)Evergrande Group’s liquidity risk level continues to rise,but its ability to resist liquidity risk continues to improve.Due to poor management and other reasons,Evergrande Group has faced serious liquidity pressure since 2018.The liquidity gap has continued to expand,and the liquidity risk level has also risen to level 3,indicating that Evergrande Group is highly vulnerable to liquidity risk crises due to market shocks.Therefore,when preventing and resolving liquidity risks,real estate enterprises not only need to strengthen their own management level,but also to ensure sufficient liquidity from the asset and liability sides.On the one hand,they should optimize the structure of financial assets,change a single financing channel,expand marketing channels,and strengthen sales and repayment capabilities,in order to provide sufficient liquidity from the asset side;On the other hand,it is necessary to ensure a reasonable capital structure,reduce the high debt ratio of enterprises,and actively restructure debts in order to alleviate liquidity pressure from the debt side.