Analysis On The Motivation And Performance Of China Shipbuilding Industry Company Limited Market-oriented Debt-to-equity Swap

Since the international financial crisis in 2008,the leverage ratio of Chinese enterprises has been on a fast rise and the debt paying costs has been constantly increased,which results in the enterprise's continuously increasing risks of debt default.The exorbitant leverage ratio and debt paying costs not only limit enterprise's financing capacity but contribute to the constantly increasing non-performing loan ratio of commercial banks at the same time,which gives rise to a systematic risk and then harms the whole development of national economy.In order to carry out the decision made by the Party Central Committee and the State Council that pushing supply-side structural reform and taking highly of “ discard three things(capacity,inventory and lever),reduce one thing(costs),supply a gap”,and to facilitate the establishment and perfection of modern enterprise system,and to strengthen developing tenacity of national economy for a long time,the State Council published Advises for Reducing the Enterprise Leverage Ratio Through an Active and Stable Method Promoted by the State Council in 2016.Since then,a new circle of debt-to-equity swap has shown up in China.Under the situation of the new form implemented regards our national economy,the enterprises which conform to the demands should be implemented with debt-to-equity swap.In this way,it is beneficial to reduce the leverage ratio for those enterprises and to avoid financial risks.Therefore,it will strengthen the enterprise's influence in the capital market and improve their ability of sustainable development.This paper takes China Shipbuilding Industry Company Limited as the object of study,and deeply analyzes the reason of debt-to-equity swap implementation as well as the enterprise's performance changes after implementing the system(refers to debt-to-equity swap)by using of the case study method.First of all,this paper introduces the researching background and the meaning of debt-to-equity swap and analyzes related literature at home and abroad.Then this paper reviews the concept and the theoretical basis of the system and makes a comparative analysis towards similarities and differences of these two systems implemented in different periods for finding out the key point of the debt-to-equity swap in this round and providing the theoretical foundation for the study of this paper.Secondly,this paper makes a detailed introduction of Debt-to-equity Swap Scheme of China Shipbuilding Industry Company Limited and its implementing process in terms of operating steps,subject of implementation,capital source,price of share transference,exit mechanism and etc.And then according to the motivation of the system,this paper deeply analyzes four orientations including macro economy,industry cycle,national policy and self-requirement.After that,it finds out that China Shipbuilding Industry Company Limited exists many problems such as heavier debt burden,cash flow shortage and etc.At last,this paper analyzes the influence of enterprise' performance brought by the debt-to-equity swap system from debt paying ability,operation capacity,profitability,growth ability,economic growth point,cash flow,and etc.Besides,it also analyzes the influence of enterprise' non-financial performance brought by the system from operation,management,strategic transformation and etc.Finally,it has been found out that implementing market-oriented debt-to-equity swap will effectively reduce enterprise's financial burden and perfect enterprise's managing structure as well as improve enterprise's ability of operation and management.Besides,enterprise's transformation and upgrade and enterprise's continuously healthy development will be achieved under the system.In conclusion,this paper is likely to provide some references for implementing the system of market-oriented debt-to-equity swap.On the one hand,the system should obey the principle such as “marketization,legislation”.On the other hand,the debt-to-equity swap should be carried out under a rigorous way and be stopped completely.As for the third point,it should be concluded that pushing the reform of enterprise's managing structure and achieving the mutual benefit and win-win result regards double sides of the system.