Research On The Influence Of State-owned Assets Relief On The Performance Of Private Enterprises

Private enterprises contribute greatly to China’s economy and are the main contributors to the country’s tax revenue,gross domestic product and technological innovation achievements,playing an indispensable role in the social process.However,the financing dilemma of private enterprises has been one of the factors restricting them from moving to the next level.Although China’s financing policy was slightly relaxed in 2015,giving private enterprises the opportunity to grow,various new regulations were introduced in 2017 and thereafter,such as those related to equity pledging,shareholding reduction,refinancing,capital management,etc.,which have again put a fence around private enterprises’ financing.Coupled with the fact that the debts of several enterprises have reached their repayment deadlines,private enterprises have "more than enough capacity" to repay their debts.A combination of factors has dealt a heavy blow to private enterprises,leading to a cluster of negative phenomena in the capital market,such as the risk of equity pledges closing out,the widespread freezing of major shareholders’ equity and a wave of defaults in the bond market.In response,the government has introduced a series of policies to address the difficulties,guiding local governments,brokerages and insurance companies to come to the aid of private enterprises in order to address their immediate needs for debt repayment and financing.Under this opportunity,the troubled private enterprises have seen a turning point,and the cooperation between state-owned enterprises and private enterprises may change the disadvantage of private enterprises.It is worth mentioning that state capital bailouts should not only be limited to buying time for private enterprises,but should also focus on restoring and enhancing the sustainable profitability and industrial growth capacity of listed companies themselves on the basis of alleviating liquidity crises,thereby achieving a better bailout effect.Based on such a background,this paper selects a company,Shuifa Gas,which fell into high pledging distress in2018,as the subject of the study.On the premise of analysing the specific reasons why the company was bailed out,it explores the specific assistance and key changes that Shuifa Gas received as a result of the introduction of state capital bailout,and then analyses the performance of Shuifa Gas after the state capital bailout,as well as the potential risks of the bailout process.Firstly,after reviewing the literature on bailouts,defining key concepts and elaborating on relevant theories,this paper introduces the background of the current bailout system and the specific situation of corporate bailouts in China,in order to set the scene for the case studies that follow.Secondly,this paper presents a case study of Shuifa Gas,in which the various measures taken in the bailout are analysed,and the profound changes in governance,strategy and operations are further investigated,based on the analysis of listed companies receiving financial assistance to solve their surface problems,in order to outline the pathways through which state bailout affects corporate performance.At the governance level,the analysis is based on optimising the shareholding structure and organisational structure;at the strategic level,the analysis is based on restructuring the core business and laying out the whole industrial chain;at the operational level,the analysis is based on increasing investment in gas subsidiaries,acquiring town gas projects and optimising resource allocation.In addition,this paper uses event studies and financial indicators to analyse the performance of Shuifa Gas and to make a comprehensive assessment of the changes in corporate performance.In addition,the paper analyses the risks involved in the relief process.Finally,on the basis of these analyses,the conclusions and recommendations of this paper are summarized.Through the in-depth analysis of the case,the main conclusions of this paper are as follows: First,enterprises are bailed out by state-owned assets because they are in crisis but have development potential,and enterprises choose equity-based bail-out because of high pledge rate and debt pressure.Second,enterprises introduce state-owned assets,obtain funds to solve liquidity risks,and make changes and adjustments at the governance,strategy and operation levels to ensure continuous operation and enhance development capabilities,thus affecting enterprise performance.Third,the performance of enterprises has indeed rebounded after the introduction of state-owned assets,indicating that the rescue effect has reached expectations.Fourth,the state-owned bail-out is in the initial stage,which contains moral,operational and market risks.The contribution of this paper is to supplement the research on the specific impact path and long-term performance of state-owned assets bail-out on the performance of private enterprises under equity investment,and to provide more targeted reference experience for other private enterprises that intend to adopt equity bail-out to solve difficult problems.