A Study On Tunghsu Optoelectronic’s Bond Defaults Causes,Impacts And Credit Risk

Since 2018,with the deterioration of the macro economy and the tightening of the credit environment,the bond market has ushered in a wave of defaults.A large number of credit bonds have defaulted.As for the number of defaulted bonds and the number of defaulting entities,2019 is even worse than 2018.Under the severe macro environment,it is particularly important to prevent companies from falling into financial distress and producing the serious consequences of bond defaults.In addition,how the regulatory authorities respond and how investors can avoid losses are of great significance to China’s financial markets and investment entities.In 2019,Tunghsu Optoelectronic held a large amount of monetary funds but defaulted on bonds,shocking the capital market.The dissertation tries to do case analysis of Tunghsu Optoelectronic’s default event,with discussion on the company’s financial distress and credit risk.Firstly,this dissertation introduces the current situation of China’s bond defaults,analyzes the overall trends and characteristics of China’s bond defaults,and then introduces the basic situation of the case study object,Tunghsu Optoelectronic,and the process of bond issuance and default.In the following,this dissertation analyzes the reasons of the bond default of Tunghsu Optoelectronic from three perspectives including macro,industry and company level.It is concluded that,under the background of macroeconomic downturn and fierce internal competition in the industry,the company has expanded blindly,but the expansion of the business has not brought in improvement of operating cash flow.And the company has relied on refinancing for debt principal and interest repayment in the long term.Eventually,the fragile funding chain led to Tunghsu Optoelectronic’s default.In addition,this dissertation also finds that the event of default has a strong negative impact on the company’s subsequent financing and operation,as well as the company’s stock price,but it also alerts the managers of the company and the investors in the market.Finally,the dissertation uses the Z-score model and the KMV model to analyze the company’s credit risk changes before the bond defaults,and further compares the company’scredit risk level through horizontal comparison with companies in the same industry.Through multi-dimensional comparison,find that Tunghsu Optoelectronic has exposed higher credit risk before default.In addition,compared with the serious time lag of rating institutions on the company credit ratings,the Z-score model and the KMV model can be used separately from financial and stock markets perspectives,playing a better warning role for the rise of the company’s credit risk.Therefore,combining these two models can help forewarn investors of credit risk.