Research On Enterprise Financial Risk And Countermeasures Under VIE Model

For a company that is still in the early stage of development,they need an amount of funds with stable and smooth financing channels urguely.However,mainland banks set high loan thresholds,P2 P and crowdfunding platforms are in a lot of situations,so many companies choose equity financing.Given that it is generally difficult for startups to meet the listing standards of the mainland stock market,going overseas to raise funds is a more realistic option.In fact,companies in the technology,media and telecom industries are subject to strict restrictions on foreign investment access.Core businesses do not allow foreign investment.In order to fight for the large amount of funds required for business operations,many companies choose to use VIE(protocol control)model to smoothly attract overseas capital.However,a lot of facts have shown that many characteristics such as the instability of VIE model increase the financial risk of the enterprise.For example,due to insufficient binding between its corporate entities,the proportion of control rights allocation is unbalanced.The information disclosure is insufficient by multi-stakeholders.Complicated related parties transactions may cause unreasonable tax avoidance operations.Funds may be subject to foreign exchange control in the process of domestic and foreign transfers.And the regulatory authorities are indifferent to the compliance of the VIE model.The author collects the theoretical knowledge of financial risk,the VIE model and risk management theory.Taking Xiaomi Group listed in Hong Kong and entities under the protocol control structure as a case to study the construction of its VIE model and its specific impact on the company's operating activities.Doing research on the introduction about corporate governance from annual financial statements,information disclosure,tax and foreign exchange transactions,compliance risk prompts of the VIE model,etc.Identify various types of existing or potential financial risk for the enterprise under the VIE model.In the first chapter of this article,the author raise the topic selection background and research worth,enumerates several theories about the VIE model,financial risk and risk management.The author points out that the adoption of the VIE model will bring additional financial risk to an enterprise.After that,the author introduces the research framework of the whole essay,elaborates research tools,states the innovations and deficiencies of the article.The second chapter is the theoretical basis of the entire article,introducing the formation background,framework structure,agreement types and motivation analysis of the VIE model.Besides,this part introduces the concept and type of financial risk,the concept of enterprise risk management,and the financial risk management of the enterprise under the VIE model.The third chapter is the main part of the entire article,which is the case study content.This article takes Xiaomi company as an example.To be specific,firstly,it introduces the basic situation of Xiaomi company,the components of the company's VIE structure,and the listing and financing situation.And then it combines the firm's financial history.What's more,public information such as statement data explores financial risk hidden in the sound development of the company,such as corporate governance risk,information disclosure risk,tax and foreign exchange risk,and compliance risk.The fourth chapter discusses how Xiaomi corporation,which adopts the VIE model,could better prevent various types of financial risk based on the previous argument analysis.The fifth chapter sums up the total paper,subsequently comes to the research conclusion and forecast.The writer hopes that the research based on the full content would assist Xiaomi firm in maintaining the stability of the capital chain as well as contribute the whole enterprise to its stable business operation and long-term development.