Financial Risk Disposal Mechanisms for Large Enterprises: Synergistic Pathways between Government Bailouts and Market-oriented Restructuring

Abstract

Through the case analysis between China, America, and Europe, this research work has demonstrated that “the single-mode model was no longer able to handle the complex financial risks and therefore needed diversified and tiered strategies on the basis of respective standards of systemic significant, risk urgency, and enterprise restructuring value.” It concludes that there is a dynamic approach with phase differentiation: First, in the phase of initial occurrence of risks, emergency assistance is provided by the government for alleviating risks to achieve stability; second, for the phase of enterprise restructuring, bankruptcy reorganization trusts and assets management companies are applied as market-oriented tools; and third, for stages of disposing assets, REITs and other funds are applied for regaining value. Synergistic mechanisms are able to function effectively only after demarcating bail-out boundaries for the government, enhancing the toolbox for market-oriented tools, forming inter-departmental coordination frameworks, and avoiding moral hazards.