Research On The Risk Effect Of Enterprise Equity Investment

Risk management has always been an important part of corporate governance.However,common risk management tools may have different kinds of limitations.For example,industrial diversifications may have principal-agent problems,high investment costs or cross subsidies,and the enthusiasm of Chinese enterprises to use derivatives is far lower than the international average.In contrast,since the implementation of share splitting reform,enterprise equity investment began to exhibit lots of advantages,such as widely used,open and transparent trading market,controllable investment cost and flexible recovery.Therefore,this thesis focuses on a comprehensive and objective evaluation of the feasibility,actual effect and potential negative impact of equity investment in enterprise risk management,in order to provide a new choice of risk management tools for Chinese enterprises.From the perspective of risk management effect,enterprise equity investment may not only have the effect of risk diversification based on the perspective of portfolio,but also enhance the operation ability and market position based on the right of control and production relations,so as to have the effect of risk management.From the perspective of potential negative effects,equity investment may not only increase financial risk due to high cost,but also generate capital market risk due to over financialization and generate asset price co-movement due to the cross-shareholding.This thesis combines a series of methods that including theoretical modeling,text analysis,micro econometric,simulation,network analysis and spatial econometric to investigate the above questions.First,enterprise correlation measurement based on big data text.Under the background of enterprise diversification,the existing single industry classification for enterprises is difficult to accurately reflect the industry attributes of enterprises.Thus,in order to further investigate the effect of risk management of equity investment,this thesis uses the business scope and other information of 34 million enterprises in China,and uses text analysis methods such as fast Text algorithm to calculate the industry association probability and the enterprise association probability under the two modes of enterprise investment(diversification and equity investment).Second,the effect of risk management of enterprise equity investment.On the one hand,this thesis constructs an investment decision-making model based on the utility maximization of stakeholders,and investigates the risk diversification effect of enterprise equity investment and its complementary and alternative relationship with industrial diversification from an empirical perspective.On the other hand,this thesis discusses the risk management mechanism of equity investment from the production and operation level based on reducing information asymmetry,industrial chain integration,alliance,and synergy,and measures it through empirical analysis.Third,the potential negative impact of equity investment.On the one hand,this thesis establishes a cross-shareholding based stock price co-movement model based on random shocks and complex network,and verifies the asset co-movement caused by cross-shareholding by means of spatial econometrics.On the other hand,from the perspective of negative news hiding,this thesis discusses the mechanism of financial equity investment affecting stock price crash risk,and innovatively examines the role of cross-shareholding in it.Based on the above analysis,the main conclusions of this thesis are as follows: First,from the perspective of risk diversification,equity investment can effectively reduce enterprise idiosyncratic risks and industry risks.Equity investment with a larger industry span is more helpful to deal with industry risks,and there is a substitution relationship between equity investment and industrial diversification,especially when both have a smaller industry span and this substitution effect is stronger.Second,from the perspective of production relations,equity investment as a whole has little explanation for the risks of upstream and downstream industries at the operation level,indicating that equity investment mainly reduces enterprise risks through the decentralized mechanism.Third,from the perspective of cross shareholding,it is found that the stock price linkage effect formed by the shareholding network is relatively weak,but the market fluctuation is more sensitive to the change of network structure.Fourth,from the perspective of financialization,it is found that the equity investment of enterprises in the financial industry has a significant " shifting from real to fictitious " effect.The long-term equity investment and short-term financial investment in the financial industry aggravate the risk of stock price collapse by generating and hiding negative news respectively,while cross shareholding further promotes it and leads to the risk spillover effect of individual stock collapse.To sum up,enterprise equity investment is feasible in risk management.Enterprises with higher industrial risk can diversify the risk through equity investment with larger span to make up for the shortage of diversification costs and financial hedging,while enterprises with higher idiosyncratic risk can flexibly choose equity investment or diversification strategy according to their own strength.Meanwhile,regulators should pay attention to the screening of enterprises with high node centrality in the crossshareholding network,and pay attention to the disclosure of financial investment information to prevent potential large-scale asset co-movement and extreme risk events.