Financial risks in small state- owned and private companies of China Wendan Zhong IMGP

 Content 1.Background 2.Literature Review 3.Research Question 4.Methodology and Methods 5.Conclusion 6.Reference

 Background Small companies take an very important role in the economic circumstance of China. There are many research about financial risks and accounting control of the small companies (Deng, 2011; Kyriazoglou, 2012).

 Background Summary of introduction –Face the financial problems –Both state-owned and private companies –Specialization and distinctions

 Literature Review Four common types of risks ‒ Credit risk Current ratio, debt-equity ratio and operating margin to quantify (Jayadev,2006) ‒ Market risk Market price, currency exchange and interest rate (Gastineau, 1993).

 Literature Review ‒ Invest-rate risk Borrow money to make investment (Deng,2011) Lack of assessment (Wang,2015) Limitation: How to make right assessment on the investment program? ‒ Internal risk Weak in both type Segregation of duties （ Kyriazoglou,2012)

 Literature Review Main Causes of financial risks in private companies (Ren, 2014) 1.Cash flow 2.Limitation on financing 3.Running pattern

 Literature Review Solutions (Deng, 2011; Ren, 2014) 1.Budget plan 2.No private lending 3.Diversity of enterprises’ property rights

 Literature Review Main causes of financial risks in state-owned companies (Li, 2010; Pan, 2009) 1.Liquidity of assets is low 2.Imporper investment decisions 3.Changes of legislations and policies 4. Ambiguity of power and duties

 Literature Review Solutions (Li, 2010; Pan, 2009) 1.Knowledge and qualities improvement 2.Early risks warning models 3.Build up monitor system Limitation: Ignore the characteristics of both types of companies.

 Literature Review Conclusion Predictable factors: Debts, cash flow, investment and internal quality Unpredictable factors: Changes and investment rate Similar causes lead to similar financial risks Gap : Different financial risks between this two types of companies

 Research Question How do financial risks affect small companies in China? - Are there differences of financial risks between state-owned companies and private companies? -What are the reasons for the differences? -What policies do the governments need to take into pratice to protect the both types of companies?

 Methodology Quantitative Qualitative

 Methods Interview Semi-structured interviews Close-ended and open-ended 5-6 interviewees Through internet Limitation Sample is small and cannot be generalized to all the situations.

 Interview Questions —If the answer is state-owned or private companies only 1. Which kinds of financial risks the state-owned companies usually face? What are the causes of these financial risks? 2. What characteristics do the state-owned companies have that may influence the financial risks they will face? Why do the characteristics will affect the financial risks? 3. Do you have suggestions on the policies to decrease the possibilities of financial risks?

 Interview Questions —If the answer is Both 1.Are there differences of financial risks between state- owned companies and private companies? What are the reasons for the differences? 2.Do you have suggestions on the policies to decrease the possibilities of financial risks of both types?

 Methods Documents Analysis Use internet to search information and use library to find related documents. Case study Based on the interview and documents found before. Involved analysis the evidence about the real entities.

 Conclusion The different characteristics can lead to different financial risks between state-owned and private companies. It is necessary to find the different financial risks of the two types of small companies which relate to different solutions.

 Reference List Bansal, A., Kauffman. R. J., Mark, R. M. and Peters, E., Financial Risk and Financial Risk Management Technology(RMT). Information and management, [online] 24 (5), Available at ： [Accessed 13th April, 2002] [Accessed Gastineau, L., The Essentials of Financial Risk Management. Financial Analysts Journal, [online] 49 (5), Available at ： [Accessed 5th November, 2003] [Accessed 5 Jayadev, M., Predictive Power of Financial Risk Factors: An Empirical Analysis of Default Companies. Vikalpa, [online] 31 (3), Available at: [Accessed 9th June, 2008] Kyriazoglou, J., Business Management Controls, [E-book] Cambridgeshire: IT Governance Publishing. Available at: [Accessed 19th December, 2012] Li, R., Research on Problem of Prevention and Control of the Listed Companies' Financial Risk in China. Future Information Technology and Management Engineering (FITME), [online] 2, Available at ： [Accessed 10th October, 2010]

 Reference List Munteanu,V., The Dynamics of the Accounting Models and Their Impact upon the Financial Risk Evaluation. Academic Journal of Economic Studies, [online] 1 (1), Available at ： [Accessed 17th March, 2015] Pan, X. W., State-owned Enterprise Financial Risk Control And Preventive Measures. Markets Forum, [online] 63 (6), Available at ： [Accessed 20th May, 2009] Ren, H. H., Private enterprise financial risk analysis of the causes and prevention strategies. Commercial Economy, [online] (141) 15, Available at: [Accessed 9th October, 2014] Wang, S., Discuss the cause of our country small and medium-sized enterprise financial risks management and protection. Business, [online] 208 (29), 7-7. Available at ： [Accessed 15th October, 2015]