AN EMPIRICAL STUDY ON SYSTEMATIC BOOST OF CORPORATE VALUE FROM THE PERSPECTIVE OF THE THEORY OF THE FIVE ELEMENTS

Abstract

The paper discusses how to boost corporate value systematically based on the theory of the five elements in traditional Chinese culture; firstly, the categorization and analogy approach from the theory of the five elements is applied to make the five elements correspond to the five major factors influencing corporate value: metal, wood, water, fire, and earth, correspond to business innovation, financial capability, operational efficiency, competitive barriers, and comprehensive capacity, respectively, and the logical relation in these five elements is described and explained according to the principle of inter-promoting relation in the five elements. Continuous business innovation will bring about the improvement of operational efficiency, which in turn will be directly reflected in the growth of financial indicators, thereby providing an enterprise with the performance growth and cash flow guarantee; depending on a better profitability, the enterprise is capable of attracting and accumulating resources such as talents and capital, gaining competitive advantages and forming competitive barriers, as well as promoting the improvement of comprehensive capabilities and the cultivation of corporate culture; in addition, the improvement of corporate atmosphere can promote innovation more effectively, and thus boost corporate value systematically. Moreover, inspired by neural networks, the paper establishes an umbrella corporate value scoring system by combining it with the M-P neuron model, which is composed of the umbrella chart of corporate value scoring and the five-element neural network evaluation model. With respect to an enterprise, the five factors can be scored after an analysis is performed on its financial reports, industry rankings, corporate announcements and other information, and a five-dimensional umbrella radar chart can clearly present the performance of each factor influencing its value; the industry average is taken into account in scoring, the umbrella chart of each enterprise is not isolated but comparable because they all establish a certain connection with the industry; the five-element neural network evaluation model is regarded as a tool to facilitate enterprises to calculate the corporate value score, also with the help of the initial scoring of each element. The score reflects the inter-promoting relation principle of the five elements and can show how much each element can contribute to the improvement of the corporate value under the mutual influence, thereby highlighting the concept of systematic boost of corporate value. In this paper, the five elements analysis theory is applied to analyze the five enterprises: Ali Health, Wal-Mart, Tesla, Kweichow Moutai, and Haidilao, and find out the advantages of each company by making use of the inter-promoting relationship between the promoting elements, promoted elements and advantageous elements, and conclude their shortcomings of the companies and provide development suggestions. Finally, this paper explores the application method of the principle of inter-restricting in case analysis, i.e. developing the elements restricting advantageous elements, and promoting the systematic boost of corporate value from the perspective of balance. This chapter also expands the theory of the five elements from a company to the whole industry, and established a three-level classification system of "industry-segment -company". Each company in industry has its own advantages and it is unavailable to extract the advantageous element in the whole industry. However, in the process of dividing the industry into multiple segments, the present research concludes that the leading enterprises in each segment represent the future development trend of the field to a certain extent. The advantages of this enterprise tend to represent the advantages of this field. As a result, the leading enterprises can obtain various high-quality resources in the industry, which is helpful to further boost their corporate value.