Debt-to-Equity Swap,Financial Performance And Stock Price

In recent years,the domestic economy has continued to decline,and the leverage ratio of enterprises and the non-performing loan ratio of banks have remained high.Under this circumstance,many enterprises have fallen into operational difficulties,so the debt-to-equity swap was raised again.Compared with the first round of debt-to-equity swap,this round of debt-to-equity swap is a marketoriented debt-to-equity swap,and they are different in the participation subject,the approval process,the scale of implementation and so on.As a means of effectively reducing leverage and non-performing loan ratios,debt-to-equity swap has an important impact on the sustainable development of enterprises and the stability of the entire economic system,so the study of debt-to-equity swap has important practical significance.At present,domestic scholars' research on debt-to-equity swap mainly focuses on the comparative analysis of debt-to-equity swaps,the motives of debt-to-equity swap,the risks of debt-to-equity swap,and the impact of debt-to-equity swap.Although there are many studies on the impact of debt-to-equity swap in China,there are few studies on the impact of debt-to-equity swap on financial performance or the company's stock price.In the past,the research on the impact of debt-to-equity swaps on enterprises mostly used theoretical analysis or case analysis,so the results obtained in this way lacked accuracy.In addition,the existing article on the impact of debt-to-equity swaps on financial performance or the stock price has not further analyzed whether the impact of debt-to-equity swap on corporate financial performance will vary from industry to industry and the impact of the size of debtto-equity swap on stock price.As we all know,the purpose of enterprises to implement debt-for-equity swap is to get out of financial difficulties and achieve sustainable development,but what is the actual effect? Studies have different views on this issue.Most studies have shown that debt-to-equity swap can improve a company's financial performance by optimizing the capital structure of enterprises,resolving internal agency problems,and strengthening external supervision.However,some studies have pointed out that debt-to-equity swap can only play a part in improving the company's operating conditions and financial status.And if you want to fundamentally improve the company's situation,you need to start from within the company.In addition,there are also some studies showing that the impact of debt-to-equity swap on corporate financial performance is not significant.Therefore,what effect does debt-to-equity swap have on corporate financial performance? This issue needs further verification.In addition,in response to the wave of debt-to-equity swap,many investors choose to invest in the stocks of debt-to-equity swap.In theory,debt-to-equity swap will affect investors' trading decisions by affecting investors' financial expectations of the company,thus affecting stock prices.But in practice,what effect does the debtto-equity swap have on the company's stock price? This issue needs further verification,too.On the basis of previous studies,this paper takes firms of market-oriented debtto-equity swap as a total sample,and analyzes the impact of debt-to-equity swap on financial performance and stock price.On the one hand,this paper uses the panel data formed by 27 companies whose debt-to-equity funds have landed as the research target to discuss the relationship between debt-to-equity swap and corporate financial performance.And by extracting sub-samples,this paper will further analyze whether the impact of debt-to-equity swap on corporate financial performance will vary from industry to industry.On the other hand,by taking the listed company that signed the debt-to-equity swap agreement as a sample,this paper uses the event research method to study the stock price effect generated by debt-to-equity swap,and a model will be established to further analyze the impact of the size of the debt-to-equity swap on the stock price.The conclusion of this paper is as follows:(1)at the 5% significance level,the debt-to-equity dummy variable has a positive explanatory ability for corporate financial performance,and at the 10% significance level,the debt-to-equity time variable has a negative ability to explain the financial performance of the enterprise.The results show that debt-to-equity swap can significantly improve corporate financial performance.However,after debt-to-equity swaps are implemented,corporate performance will decline over time.Therefore,it is more accurate that debt-to-equity swap can significantly improve short-term financial performance;(2)the impact of debt-to-equity swap on corporate financial performance has industry differences.The empirical results show that for the steel and coal industries,the positive impact of the debt-to-equity dummy variable on the financial performance and the negative impact of the debtto-equity time variable on the financial performance are not significant.But the analysis results of other industries show that the impact of debt-to-equity dummy variables and debt-to-equity swap time variables on corporate financial performance is significant at 5% and 10%,respectively.This shows that debt-to-equity swap have a greater impact on corporate financial performance of other industries;(3)the implementation of debt-to-equity swap has a positive impact on stock prices.This effect generates from the day before the signing of the market-oriented debt-toequity swap agreement(t=-1)and will continue until the third day after the signing of the debt-to-equity swap agreement(t=3).Starting from t=4,the average abnormal return rate AAR will fluctuate around 0 again,and the cumulative average abnormal return rate CAAR will be stable at a certain level.In addition,compared with other periods,in the three days of t=-1,t=0 and t=1,the positive impact of debt-to-equity swap on stock prices is more significant;(4)at the 5% significance level,the larger the size of debt-to-equity swap,the lower the stock price,that is,the size of debt-toequity swap significantly negatively correlated with stock price.