Case Analysis Of Jiangquan Group Bond Default

The bond market is an important part of the capital market and financial market,and it is also one of the important channels for financing the real economy.Since 2005,the rapid rise of China's credit bond market has promoted the gradual standardization of the bond market.The direct financing function has become increasingly prominent,and bond issuance has grown rapidly.However,as the bond market expands significantly,the overall credit risk level of the market is gradually accumulating.As the economic growth continues to decline and the rigid payment is gradually broken,it begins to expose and accelerate the release.The number and scale of bond defaults peaked in 2016,and the credit bond market entered the trend of “default normalization”.According to statistics,in 2016 alone,a total of 79 bonds were substantially breached in the Chinese bond market,involving 34 issuers.The default amounted to 40.3 billion yuan,a year-on-year increase of 220%.In the 2017 bond market,there were a total of 49 bonds in default,which was 29 fewer than in 2016.Although the number of defaulted bonds and entities decreased compared to 2016,the balance of defaulted bonds remained unchanged.Therefore,how to prevent the risk of default on bonds is an issue we are facing and urgently need to solve.Jiang Quan Group's bond default is a typical case in which small and medium-sized private enterprises fall into a financial dilemma under the background of supply-side reform.Jiang Quan Group is a comprehensive group company.Its issued “12 Jiangquan Debt” failed to distribute the principal of the bonds to be repurchased on March 13,2017.It only paid interest and constituted a material breach of contract.On March 22 nd,Jiang Quan Group issued back sales funds.Although the breach period is relatively short,in fact,Jiang Quan Group's debt risk has already shown signs since 2015,and this breach of contract should cause us to pay close attention to the risk of bond default.This article uses this breach event as a research case to discuss and research the causes of the formation of default risk of the company,and summarizes the bond default inspiration from the perspective of the issuer and the supervisor.First of all,the current research situation at home and abroad is elaborated on the information asymmetry theory,financial distress theory and bond default model,the first chapter also lists four key point of this article.Secondly,the basic situation of Jiangquan Group was briefly introduced,and the process of bond default was reviewed and combed thoroughly.Then,we conducted an in-depth analysis of Jiangquan Group's external environment,business strategy,accounting information quality,financial status,and regulatory level by using Harvard's analysis framework,revealing the real causes of debt defaults,and verifying the results of debt defaults through the Z-score model.Finally,on this basis,I also made targeted recommendations based on the reasons for the breach.This study finds that: First,it causes internal and external factors for Jiang Quan Group's bond defaults.External factors include industry,policy,and government fiscal conditions.Internal factors include three factors: business strategy,accounting,and financial status.Internal factors are the main reason for the bond default.Second,the Z-score model can verify Jiang Quan's bond default risk.Third,the issuer can prevent bond defaults from the following five aspects: establishing a financial warning system,improving corporate governance,focusing on industry risks,increasing investment in innovation,and broadening financing channels.Fourthly,the bond market regulators can improve the supervision level by improving the supervision mechanism of rating agencies,referring to the exemption system,and reducing the cost of supervision.Related government departments should also cooperate with banks and enterprises to resolve regional guarantee risks.This article hopes that through the proposed risk prevention and control strategies,it can help the company improve its operation and management level and improve its own governance,thus reducing the risk of default.It also hopes to provide some reference for promoting the healthy development of the Chinese bond market and raising investors' overall risk awareness.