A Case Study On The Influence Of The Market-Oriented Debt-to-Equity Swap On The Enterprise Value Of Nanjing Iron And Steel Co.,Ltd.

On October 10,2016,the State Council officially launched this round of market-oriented debt-to-equity swap.By the end of December 2018,there were 226 enterprises that have implemented this swap,and the amount of this swap has exceeded one trillion.The country aims to promote supply-side reform and help the company that temporarily encounter difficulties to tide over the difficulties.Debt-to-equity swap is not only necessary to reduce the financial leverage of enterprises,but also to improve the long-term development of corporate and enhance corporate value.China’s private enterprises that have implemented market-oriented debt-to-equity swaps started late(in 2017,there is only one case),but in view of the enterprises that implemented debt-to-equity swaps in 2018,the number of private enterprises has increased significantly.The proportion of the amount increased from 1% in 2017 to 14.6%.In the 2019 “Two Sessions” work report,the government encouraged financial institutions to support the development of small and private enterprises.For the government providing a good market environment,the implementation of market-oriented debt-to-equity swaps is of great significance for promoting enterprises to achieve sustainable development and enhance corporate value.This paper adopts the case analysis method to select the first private mixed ownership enterprise Nanjing Iron and Steel Co.,Ltd.(hereinafter referred to as “Nanshan Iron and Steel Co.,Ltd.”)to implement the debt-to-equity swap.The paper uses the enterprise comprehensive performance evaluation method and event research method,Tuo Bin Q value analysis,comparative analysis and other methods to analyze the impact of debt-to-equity swaps on corporate value.It is quite beneficial for enterprises to implement debt-to-equity swaps.The value of enterprises can reflect the ability of stakeholders such as shareholders,creditors and senior managers to achieve expected returns.The improvement of debt paying ability can bring benefits to creditors;as a public company,the increase in the market value of enterprises can bring more returns to shareholders;the implementation of executive incentives by the company can increase the profits of senior managers and promote them to serve the long-term development of the company.Therefore,this paper selects the enterprise value as an indicator to evaluate the impact of debt-to-equity swaps on enterprises.The analysis part of the article is also closely related to the connotation of enterprise value.The conclusions drawn from the analysis are three aspects:(1)After the implementation of the debt-to-equity swap,the profitability and debt status of the company had significantly improved.So the financial index of the enterprise value was optimized.(2)After the implementation of debt-to-equity swap,Nangang increased shareholder welfare,enhanced investor confidence,and increased the market value of the enterprise.(3)The debt level and the level of executive equity incentives have an alternative relationship to the value of the enterprise.After the debt-to-equity swap,the company implemented the executive equity incentive plan which serves as a mean of corporate governance and enhanced the employees integration senses to improve the long-term value of the company.Finally,the article makes recommendations on the implementation of debt-to-equity swaps from three perspectives: government,commercial banks,and enterprises.