The Impact Of Government Intervention On Corporate Debt Default From The Perspective Of Different Property Rights

In the last decade,along with changes in the domestic and international market environment,China’s overall macroeconomic growth has slowed down.Simultaneously,to expand the market capacity and attract more investors,the entry threshold of China’s bond market began to gradually lower,and the number of participating issuers increased.Since March 2014,when the "Chao-ri Bond" was first declared in default,the frequency of debt defaults in China’s bond market has been increasing year by year.The scale of defaults has continued to rise,with a peak development in the past three years.The scope of defaulting subjects has been expanding,from private enterprises to local state-owned enterprises and central enterprises.So how does the debt default of enterprises occur? Are the reasons for debt defaults of enterprises with different property rights the same? What is the difference in the motivation and means of government intervention in the event of debt default among enterprises with heterogeneous property rights,and what are the economic consequences of the intervention? How does the performance of enterprises change after government intervention? These questions have been discussed by the government and enterprises in China and have focused on many scholars in China and abroad.Therefore,this paper will summarize and analyze these questions based on previous theoretical results and specific cases.This paper attempts to elaborate from two perspectives: the nature of property rights and government intervention,and takes two companies,Yunwei and Huishan Dairy,as research objects,to sort out the causes and processes of debt defaults of two companies that are both local pillar industries but state-owned and private respectively.The study finds that responding to debt defaults requires the firms’ bankruptcy reorganization based on an integrated enterprise-wide approach.Besides,given the different degrees of control,both in terms of support and the number of interventions,the local government gives more careful assistance to state-owned enterprises in debt default than private enterprises.Simultaneously,the effect is more prolonged,and state-owned enterprises are more likely to get out of trouble and regain their lives under government intervention.In contrast,private enterprises still need to find self-help means in addition to government intervention.Moreover,state-owned enterprises are more likely to get out of trouble and find a new life under government intervention than private enterprises.More importantly,government intervention has different economic consequences in different situations.Although the government subsidizes enterprises’ needs for the widespread industry distress due to the necessity of social stability,the market and investors do not have a correspondingly positive response to enterprises that the government has repeatedly intervened to deal with debt defaults.Therefore,government intervention should help high-efficiency enterprises in more cases.Therefore,government intervention should be more often to help high-efficiency enterprises to overcome difficulties,rather than the long-term bailout of inefficient enterprises,resulting in a vicious circle.