An Analysis on Financial Consequences of Enterprise’s High Growth-Evidence from China’s Listed Companies
|School||Jiangxi University of Finance|
|Keywords||High-growth Financial leverage Financial crisis Stockholder’s wealth Financial consequences|
The macroscopic economy is in continuous growth period, but resource constraints become more and more serious and capital efficiency in the general situation of wandering and decline. For many years, one objective of the macroeconomic policy regulation is the stable economic growth speed, improved the efficiency of capital, and realized the sustainable development of the economy. Since 2000 year, along with our country economy into a new period of rising cycle, national economy develops fast, the foreign trade is increasing, the most industry has experienced a considerable period of rapid growth stage, the growth speed of the enterprise over the historical average level, many enterprises are realized the double growth. If enterprise in the situation of high-growth, enterprise managers should consider the financial risk of the enterprise, in order to ensure that the enterprise can quickly, steady and continuous develop, then can realize enterprise financial management goal of increasing value. In this context, studied the financial consequences of high-growth that can make the managers considerate the enterprise will face what financial risk, then they can adopt corresponding strategy to prevent financial crisis, and finally increase the enterprise value. Through the research review of sustainable growth lecture, put forward an analysis on the enterprise financial consequences of high-growth. Firstly, defined relevant concepts and introduced financial sustainable growth theory, etc. Secondly, based on the theory, we analyze the financial consequences of high-growth. And selected China manufacturing industry listed companies of metal manufacturing and equipment manufacturing industry to analyze the problem. In these two industries selected the related financial date from 2006 year to 2009 year, with empirical analysis method studied the relationship between high-growth and financial leverage, financial crisis and the stockholder’s wealth. Lastly, obtained related conclusions and provided the related suggestions.In the enterprise expansion process, the managers should consider the financial consequences of high-growth. In this article, the financial consequences of high-growth enterprise can be divided into two levels, firstly, the financial consequencesⅠof high-growth enterprises as the financial leverage, and the financial consequencesⅡas the financial crisis, basised on the above analysis, research the financial consequencesⅢas the relationship between the high-growth rate and shareholder’s wealth. Then, the article mainly analyzes the three questions:①Financial consequenceⅠof high-growth: To the high-growth enterprise, would the high growth cause the high financial leverage? Mainly based on the theory of financial sustainable growth, we analyzed the extra funds of high-growth, in order to reflect the influence of high-growth to the financial leverage.②Financial consequenceⅡof high-growth:Whether relevant relationship between high-growth and the financial crisis? The analysis of this problem is based on the principal-agent theory, and the probability of enterprise financial crisis mainly based on Altman(2000) "Z score model", on the basis of that analyze whether an high-growth enterprise is more likely to occur a financial crisis.③Financial consequencesⅢof high-growth:This article mainly analyzed in the enterprise of high-growth situation, the relationship between high-growth rate and the stockholder’s wealth growth rate. In the situation of high financial leverage easily to cause financial crisis, the change trend of enterprise shareholder’s wealth. By above three problems, this paper introduces the financial sustainable growth theory, financial capital structure theory, and the principal-agent theory, etc. Based on the financial sustainable growth enterprises analyzed the financial leverage and high-growth, based on the principal-agent theory analyzed the enterprise financial crisis and high-growth, and based on the capital structure analyzed the theory of stockholder’s wealth and high-growth. Through the analysis of the basis theory, proposed the hypothesis. Hypothesis 1:In high-growth situation, the high-growth rate is associated with financial leverage; Hypothesis 2:The high-growth enterprise is more likely to occur enterprise financial crisis than the low growth enterprise; Hypothesis 3:In the high-growth situation, the high-growth rate negative correlation with the stockholder’s wealth growth rate.Through an empirical analysis verified that the listed companies in China high-growth additional capital demand is primarily through enterprise external debt raising, the high-growth enterprise is more likely to occur financial crisis than low growth enterprise, in high-growth situation, high-growth rate is negative correlation with the stockholder’s wealth growth rate. These results demonstrate that many listed companies in China are in the environment of inefficient growth, enterprise managers should control the enterprise growth speed to prevent financial crisis. From the perspective of financial sustainable growth, in the following aspects suggest the enterprise managers:(1) To study the relationship between financial leverage and high-growth, which can help enterprise managers comprehensive consideration of the expansion consciousness, strengthen the financial sustainable growth management to objectively evaluate the financial sustainable growth enterprises, thus avoid enterprise managers blindly pursuing high-growth. (2) To study the relationship between financial crisis and high-growth, which can help scientific enterprise management under the existing conditions adopt flexible management concept and that can make the enterprise management objectives consistent with the enterprise value goal, thus improve the financial risks of enterprise’s management level and lower agency cost. (3) To optimize the allocation of resources, promoting financial crisis prevention ability and economic benefits, realizing the value of enterprises and in-depth evaluation of enterprise financial sustainable growth.