Case Study On Financial Crisis Risk Identification Of Yong Cheng Coal And Electricity Group Based On The Financial Flexibility Perspective

As China’s bond market is developing rapidly,defaults of credit debt in various industries are a common occurance.Due to the national policy of "Overcapacity Reduction",the coal industry gradually eliminates small backward enterprises.The remaining large state-owned enterprises have also faced some operational difficulties.Simultaneously,under the influence of external environment fluctuations such as macro-economy and public crises,the instability of the business environment are increasingly serious.Therefore,the financial crisis risks faced by enterprises are self-evident.Especially for enterprises with insufficient financial flexibility reserves,debt crises and even financial collapses have occurred from time to time.Yong Cheng Coal and Electricity Group,the large coal state-owned enterprise in China,broke out into debt default on 10 November 2020,which was unexpected by the market and resulted in irreparable losses to various stakeholders.Based on the crisis,this article analyzes the present status,investigates the causes of the crisis,and discusses the feasibility and necessity of applying financial flexibility management to the financial distress prediction model.Then the entropy weight method(EVM)and the efficacy coefficient method(ECM)are adopted to construct the financial distress forecast system for coal enterprises,taking the three major economic activities of an enterprise as guidance and integrating the concept of financial flexibility management.Some optimization is applied to the method according to the comprehensive performance evaluation standard for central enterprises.The evaluation results are obtained by bringing the 2016-2020 financial data into the financial distress prediction model.Two other state-owned enterprises in the same industry are selected to be applied into the model.The validation of the model’s effectiveness is further enhanced by comparing the scores of this model with those of traditional ones.The results indicate that the financial flexibility distress forecast system constructed is more sensitive and efficient in risk identification than the conventional ones.By identifying crises in advance,it helps the management to identify the sources of financial inflexibility in a more intuitive and convenient way,which facilitates the timely reserve and release of financial flexibility.Furthermore,it can also be used as a reference for businesses of the same trade in respect of financial crisis risk recognition and early warning.