Study On Leverage Manipulation Of Real Estate Enterprise X

As a pillar industry of the national economy,the real estate industry is closely related to the financial industry and affects the stability of China’s financial system.Over the past decade,based on the financial leverage to support a huge amount of assets,most real estate enterprises have achieved rapid growth.However,high financial leverage has become one of the main risk factors in the real estate industry.And in recent years,various real estate-related restrictive financing policies have been issued to curb the wild growth of leverage of real estate enterprises and to prevent systematic financial risks.Among them,the "Three Red Lines and Four Grades" policy of 2020,in particular,aims to restrict the growth rate of interest bearing liabilities of real estate enterprises and to deleverage by setting the thresholds of asset liability ratio(excluding advance collection),net liability ratio and cash short debt ratio.However,in 2021,some enterprises with seemingly good solvency defaulted on their debts one after another,and even fell into financial crisis,whose chain reactions negatively impacted on the market.Therefore,it is of great significance to study whether the real estate enterprises have the behavior of leverage manipulation,and the causes and consequences of leverage manipulation.Firstly,this paper combs the literature related to leverage manipulation and financing risk,reviewing the related concepts such as real debt in the name of shares,off-balance-sheet liabilities,and takes the capital structure theory financial crisis theory and information asymmetry theory as the basis of this paper.Secondly,this paper takes X(a real estate enterprise)as the case study object.In the study,we find,in order to improve the external financing ability of the enterprise,meet the debt financing needs and comply with the provisions of various leverage restriction policies,X has adopted such leverage manipulation means as off-balance-sheet liabilities,real debt in the name of shares,and transferring large amount of funds from related companies.With such manipulation,the leverage has been reduced on the surface,but the risk has not disappeared.The capital chain rupture and decrease in profits risks associated with high leverage still exist.Leverage manipulation may even bring legal and supervision risks.Users of accounting information and government departments may be misled to make wrong decisions.Therefore,this paper finally puts forward suggestions to X and regulators respectively on how to reduce these risks,including reasonably formulating development strategies,increasing endogenous financing,further improving accounting standards and refining information disclosure system,in the hope to help identifying leverage manipulation means and causes,to prevent risks and deleveraging completely.