Study On The Motivation And Economic Consequences Of Market-Oriented Debt To Equity Swap In Stated-owned Enterprises

On June 29,2018,the introduction of the “Management Measures for Financial Assets Investment Companies(Trial)” clearly indicated the current environment for reducing the leverage ratio of enterprises and the proposal of “market-oriented debt-to-equity swap”.The latter was first publicly presented at the 2016 Boao Forum for Asia Annual Conference.In his opening speech,Premier Li Keqiang disclosed “Exploring Market-based Debt-to-Shares” as a reform measure in the financial sector.Unlike the one of the four major state-owned banks in 1999 that divested non-performing assets through debt-for-equity swaps,and the subsequent debt-equity swaps of the four major asset management companies,this round of debt-to-equity swaps mainly served to de-leverage of entities.Reduce the debt pressure on the company's stock.After a long period of time,debt-for-equity swaps have once again caused widespread concern.Whether the new round of market-oriented debt-to-equity swaps can overcome the shortcomings of policy-based debt-to-equity swaps and play the expected role is worth exploring.This paper attempts to combine the theory and case,from the motives and economic consequences of debt-to-equity swaps,to find the deep meaning of the market-oriented debt-to-equity operation mechanism.Based on this background,this article focuses on the analysis of the market-oriented debt-to-equity swaps of state-owned enterprises in China by combing the theory of debt-to-equity swaps and research literature,and selecting the motives and economic consequences of market-oriented debt-to-equity swaps.Subsequently,taking China's heavy industry market-based debt-to-equity swap as a case,the implementation process,from the perspective of state-owned enterprises and investors,analyzes the multi-party game situation of the case.Finally,starting from the motivation and economic consequences of China's heavy industry market-based debt-to-equity swap,this paper analyzes the changes in China's heavy industry's financial performance and corporate governance after the implementation of market-oriented debt-to-equity swaps,and draws conclusions:(1)China When state-owned enterprises carry out market-oriented debt-to-equity swaps,the usual motives are the pressure of corporate liabilities,the difficulty of business operations,profitability,the cyclicality of the industry,and the encouragement of the policy environment.(2)The economic consequences of debt-to-equity swaps can be expressed through their special impact mechanisms.When China's state-owned enterprises carry out market-oriented debt-to-equity swaps,they can effectively improve the leverage ratio of enterprises,reduce the pressure on corporate debt,and promote business operations and development.(3)Institutional investors,in pursuit of interests,will actively participate in the issuance of corporate governance by exercising shareholder rights,creditor rights,entering the company's board of directors,and participating in the company's major business strategy,which may have an impact on corporate governance.However,for China's state-owned enterprises,they have rid themselves of the debt pressure in the past by debt-for-equity swaps.When they inject new equity power,they will try their best to improve their own performance.On the other hand,enterprises will optimize their internal governance..However,subject to the nature of the equity of the state-owned enterprises themselves,as well as the scope of business,the power of market-based debt-to-equity swaps in corporate governance is limited.(4)In the selection of the operation mode of market-oriented debt-to-equity swaps,state-owned enterprises should fully consider the implementation process of integration in light of their own circumstances,and solve the problem of creditor's rights transfer,debt-to-equity swap,and share exit,so that the implementation of debt-to-equity swaps Going smoothly.