| Agriculture is foundation of national economy. China is a large agriculture country as well as a developing agriculture country. Agriculture listed companies (thereafter ALCs) financed from capital market and promote agriculture integration operation,which is a trend in the future of our agriculture development. However,ALCs have faced big challenge in our country that performances are getting worse and diversification operations are in failure from news and papers.The important reason is no awareness of risk management. ALCs didn't set up the system of financial risk control and make great loss. According to situation of ALCs,the paper analyzes formative.mechanism of financial risk under internal an external environment factors,identifies and measures all kinds of financial risk,builds up the framework of financial risk control.The main research contentsThis paper follows the path of formative mechanism,identification and measu-rement,assessment,precaution model and control of financial risks to study as follows.1.Theoretical basis of financial control of ALCs. It includes development theory of agriculture enterprise, risk management theory of agriculture enterprise,control theory of agriculture enterprise,capital structure theory and agent-principal theory.2.Formative mechanism of financial risk of ALCs under external environment. A enterprise can survive and develop when it only is adapted to external environment. ALCs can operate normally under policy permission to increase sales and profit,decline financial risk..External environmen includes agriculture operation environments economics environment and so on.3.Formative mechanism of financial risk under internal operation and management.Under policy permission,this paper analyzes strategy,governance structure and organization structure to study formative mechanism of financial risk.4.Analysis of financial risks of ALCs. Through quantitative analysis,this paper finds the size and dissemination path of financial risks. Profitability,debt solvency capability,operation capability and development capability are important factors. Firsitly this paper measures financial risk in financing, investing,operation,dividend payout,debt guarantee and transaction between relationship parties,secondly this paper analyze financial risks with nonfinancial factors.5.This paper builds precaution model of financial risk of ALCs with financial measures and nonfinancial measures. This paper use comprehensive performance scores from factor analysis to build precaution model of financial risk, this model can discover financial risk by rank and rank fluctuation rate of ALCs, and use nonfiancial measures to analyze financial risks6.Basic concept and contermeasures of financial risk control. In order to control financial risks, ALCs should set up financial risk control system and key points of risk control. Firstly ALCs should build risk control department,position and responsibility. Secondly ALC should use risk precaution model to identify and measure financial risk including investing risk,financing risk,and operation risk etc.The main conclusionsThe main conclusion as following from this paper1.ALCs face serious financial risk by positive analysis. Provision for impairment excluding bad debt provision has a great proportion in net income during 2004 to 2008 for 49 ALCs,especially 148.2% in 2005.Only three ALCs finance from share market. ALCs have to finance from banks. Current liability has an 87.8% proportion and ALCs have a burden on interest. Bad debt provision has a big proportion in net income,especially 203.1% in 2005,51% of ALCs execute non-dividend payout policy and it is more difficulty to finance from capital market for ALCs.2.Development theory of agriculture enterprise, risk management theory of agriculture enterprise, control theory of agriculture enterprise,capital structure theory and agent-principal theory are the basis to identify asses and control financial risks,also to build financial risk management system. For ALCs, unsymmetrical information include two aspects,one is that ALCs can not know the environment exactly,the other that there is an agent-principal relationship chain in corporation. The unsymmetrical information between agent and principal produces inverse selection and moral hazard which generate financial risk. Enterprise risk management framework is the basis to establish financial risk management system.Control theory and capital structure theory can instruct ALCs to avoid and control all kinds of financial risks.3.Formative mechanism of financial risk under external environment.Economy environment, policy environment,finance environment and legal environment have important influence to financial risks for ALCs. In order to survive and develop,ALCs'operation must be consistent with government policy. One is that ALCs must operate legally; the other is that ALCs should utilize preferential policies to improve competition capability. ALCs need keep reasonable capital structure under government's support. This paper finds that ALCs have an interest burden because of lack of long term capital.4.Formative mechanism of financial risk under internal environment. ALCs should set correct strategy,efficient governance structure and reasonable organization structure to realize corporation goal and avoid and control financial risk. ALCs should improve performance by efficient management. Good management and control system need be set up by efficient governance structure and reasonable organization structure. Some ALCs have to wear the cap of PT or ST due to incorrect strategy.5.This paper analyzes operation performance from profitability,debt solvency,operation capability and developing capability and identify and asses financial risk in financing,investing, operation,debt guarantee and relationship party transaction. Dissemination path of financial risk is from factor level,dissemination level to risk effect level.Risk factor level is that ALCs' environment where they survive,dissemination level is that six accounting elements are influenced by profit or loss. Risk effect level is profitability,operation capability,debt solvency and developing capability which are influenced by enterprise performance.Also this paper analyze financial risks with nonfinancial factors.6.The causes of generating financial risk are lack in philosophy and system of financial risk control for ALCs,level of operation management of ALCs are low. Most ALCs did not set up risk management department and system leaded to a severe financial risk. For example,the ALCs have a big amount of bad debt provision which is 5.3 times than net income in 2007,and ROE is very low, ROE of 59.5% ALCs is under 6%.7. By utilizing factor analysis theory,comprehensive performance score can be calculated and used to rank. Rank and rank fluctuation rate can disclose level of financial risks for ALCs. Empirical study finds that there are 25 ALCs that absolute rank changed score over 40 during 2004 to 2008,which is 51% of 49 ALCs.8.Financial risk control concept and contermeasures should be set up to avoid and control financial risk which are consistent with characteristic of ALCs. Financial risk control is important part of enterprise; risk management; ALCs should set up financial management department and decide risk management points,and ensure that risk management can be efficiently carried out.9.Scientific decision making system should be set up to avoid and control financial risks in financing,investing,operation,debt guarantee and relationship party transaction. Use traditional project evaluation method to control investing risk,especially real option method; establish sustainable philosophy and balance stakeholders'advantage to control financing risk,set up performance management system and performance management focus system to control financial risk in operation and so on. Innovations1.Through study,low level of operation and management of ALCs is direct reason to generate financial risk. ALCs being consistent with their environment are premise. Specifically correct strategy is the key to control financial risk,scientific and reasonable performance management system is the means to control financial risk.2.Through study, from 2004 to 2008, revenue growth rate minus cost growth rate is minuse for most ALCs,It indicates that most ALCs face risk on profit decrease.3.Setting up financial risk precaution model for ALCs. This model can disclose financial risk by rank and rank fluctuate rate. The rank depends on comprehensive performance score which is calculated by factor analysis. This model can improve timeliness by using semi-annual data and quarter data.4.Give advice on concept and contermeasures of financial risk control.ALCs should set up financial risk control department and responsibility and ensure that all kinds of risk management should be carried out correctly. ALCs coontrol financial risk in operation by seting up performance management system and key aspects of performance management. The process of performance management is to identify,measure and control financial risk. |
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