Research On The Influence Of Diversification On Corporate Financial Crisis

In recent years,with the rise of diversification strategy,the exploration of diversification strategy has gradually become the focus of scholars’ attention.The research of financial crisis theory has always been an important subject in the field of financial management theory research,and the recent financial crisis events such as company default and bankruptcy in our country have occurred constantly.The occurrence of bond default,continuous loss and other events will not only bring negative impact on the reputation of the enterprise itself,but also bring profit losses to external investors: creditors,government and so on.Therefore,studying the influencing factors of financial crisis and the formation process of financial crisis can provide policy suggestions to reduce the occurrence of financial crisis and reduce the loss of stakeholders.However,the domestic scholars still have insufficient research on the factors,performance and formation of financial crisis,especially few scholars to explore whether diversification will have an impact on the financial crisis of enterprises and from what channels,and what manifestations This paper tries to study the significance of diversification on the financial crisis.This paper uses the case study method to study the formation mechanism of the financial crisis of diversified business enterprises.The selection method is: to diversify the business strategy as the background,and on the basis of the financial crisis,select the representative Shuanghuan Science and Technology as the case study object.This paper first reviews the related theories of diversification,such as "Tree" theory,internal capital market theory and higher-level theory,points out the existence of the theory of diversification premium and the theory of diversification discount,and combs the definition,influencing factors and formation process of financial crisis.Secondly,according to the existing literature,the theoretical analysis of the impact of diversified business on the financial crisis of enterprises,and put forward the Shuanghuan Science and Technology case analysis research framework:(1)The Shuanghuan Science and Technology diversification of the operation of evidence analysis.(2)Analysis of the financial characteristics of Shuanghuan Science and Technology.(3)Analysis a logical relationship between diversification and the financial crisis of Shuanghuan Science and Technology.(4)The mechanism of forming the financial crisis of the enterprise is put forward.Finally,according to the results of the case study,the countermeasures are put forward.Through the analysis of the evidence data of Shuanghuan Science and Technology case,the following conclusions are drawn:(1)The characteristics of the financial crisis of Shuanghuan Science and Technology are mainly manifested in continuous losses and the warning of de-listing risks.(2)The decline in the competitiveness of core business,the reduction of the allocation of core business resources,the lack of new business distribution ability and the error of decision-making of senior management are the path of the financial crisis affected by the diversification of Shuanghuan Science and Technology.The decline in core business competitiveness is reflected in the lack of bargaining power for suppliers and customers,and the inability to smooth the impact of rising raw material costs and falling sales revenue when market conditions are poor.The decrease in the allocation of core business resources is reflected in the insufficient investment in research and development,resulting in insufficient innovation of new products and inadequate cost control measures.Then make the shortcomings of the soda preparation method amplifies the impact of rising raw material costs,and the tightening of environmental protection policies amplifies the negative impact of reduced research and development of sewage equipment,so that the Shuanghuan Science and Technology stop-and-go frequently,the unit cost increases.The lack of new business distribution ability and decision-making error of senior management mainly manifests itself in the single experience of senior management,which can not grasp the new entry field reasonably.And when choosing to enter a new field,there is no control over the timing of entry,making misjudgments.According to the conclusion above,this paper holds that enterprises should strengthen the development of core business,expand financing channels,strengthen financial risk management capabilities and implement diversification strategy with rational when they carry out strategic changes and implement diversification strategy,so as to prevent the deterioration of financial situation and reduce the possibility of financial crisis in enterprises.